Brazil Record Soybean Crop Could Add Fuel to the Dry Bulk Market

The dry bulk market could receive further boost from a record Brazilian soybean crop. In a recent weekly report, shipbroker Intermodal commented that “this year is expected to be a record year as far as the Brazilian soybean crop is concerned. Forecasts say that the country will produce 153 million mt and will export 92.7 million mt. Usually, the country’s export season runs from February to June, but this year it is going to be different, since the heavy rains in Brazil are likely to push the record crop to the second half of the year. This can possibly coincide with the soybean export season of the United Sates which typically runs from September to February, and it is expected to yield 116.4 Mt. This will create competition between the two countries regarding market share of soybeans”.

According to Intermodal’s Research Analyst, Mr. Fotis Kanatas, “taking a look at the Brazil – China soybean trade, we understand that the trade peaks at March and then there is a gradual decrease of soybean cargoes to China. This year, the flows are strong and above the 5-year-averages. For reference, March shipments were at 9,427kt, up 12.33% from the March 5-year-average of 8,392k, while April shipments so far stand at 3,714kt, which is roughly half the April 5-year-average of 7,511kt, according to Refinitiv data. The figures are already strong and since a shift of exports to the second half of the year is expected, it is worth monitoring if the flows will stay elevated and possibly supporting freight rates for bulk carriers trading in these two regions”.

Mr. Kanatas added that “at the other end of the trade, China is one of the world’s largest importers of soybeans and the largest importer of the Brazilian commodity. In 2022, soybeans were Brazil’s top export product, with China importing 70% of it, while soybean imports from Brazil to China have almost doubled in the last 10 years. To get a full picture of the trade and its future, the demand side needs to be assessed. The bean is mainly used as an ingredient in the production of protein for animal feed, an industry struggling with feed costs and turning to alternatives such as corn and wheat. However, soybean is expected to become an affordable feed option again in the second half of the year. Historically, hog prices are rising during Q2 and Q3 and breeders are expected to return to soybean as we enter the second half of the year”.

“The competition between Brazil and the US to supply China amid the expected demand resurgence during the last six months of this year can possibly create opportunities for bulkers trading between the two regions”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide