Dry Bulk Market: Mixed Sentiment on Grain and Soybean Trades

The grain and soybeans trade sentiment appears to be mixed for the second half of 2023, as both positive and negative factors are expected to come into play. In its latest weekly report, shipbroker Intermodal said that “the assessment of the upcoming trade grain activity for the second half of 2023 reflects a nuanced sentiment, with a combination of favorable and unfavorable developments being anticipated. The export of Brazilian Safrinha corn is anticipated to support Kamsarmax utilization starting from July (traditionally a period of stronger exports); the projected export volume is expected to reach 50.3m tons with only 2.5m tons have been exported so far in the current MY. As for Argentina, 2022/23 corn export season has faced significant challenges. By June 30, only 9.8m tons of corn had been exported, which is less than the 14.2m tons for this point in the previous season and the lowest figure in recent years. Nonetheless, with an expected export volume of 23.1m tons, corn exports could contribute to improved sentiment in the third quarter of 2023. US corn production for 2023/2024 MY is projected to 364m tons (up by +2 compared to 2022) following a decline of 31m tons (2022vs2021 volume)”.

According to Intermodal’s Head of Research Department, Mr. Yiannis Parganas, “in the wheat trade, conducive weather conditions in the Northern Plains of the United States, has significantly improved spring wheat planting and emergence. Wheat production has reached 45.9m tons with late June forecasts indicating the potential for high rainfall across most U.S. spring wheat regions, which would greatly benefit crops as they enter the critical heading stage. If these conditions materialize, it should positively impact harvest activity over the next 3-4 weeks. Wheat exports are estimated at 20.1m tons, and while June has witnessed a slower pace, activity is expected to pick up from September onwards, supporting both Kamsarmax and Ultramax sectors. Argentina’s wheat production for the 2023/2024 is expected to increase by 7m tons compared to 2022/2023. However, with only 1.5m tons being exported so far out of a forecasted 4.7m tons for the remaining of 2023, a boost in exports is anticipated during the next quarter.

In Russia, high inventories could support the beginning of the new MY (from Q3 2023), with an estimated export volume of 45.3m metric tons. It is noteworthy to mention that the increased wheat trade activity can potentially contribute to the strengthening of rates in the third quarter. However, the prevailing sentiment is also weakened by unfavorable weather forecasts and decreased production in the Black Sea region, Australia, and North America with the total supply of wheat for the upcoming season (2023/24) being projected to be 5.0m tons lower than the previous season, considering the limited ending stocks. Moreover, uncertainties surrounding the “Black Sea grain initiative” and the recent destruction of the Ukrainian Kakhovka dam further amplify concerns regarding the availability of wheat supplies from the Black Sea. It is worth noting that Ukraine has the potential to export a total of 16.5m metric tons for the whole marketing year (peaking during late Q3). As far as Australia is concerned, the long-range weather forecasts provided by the EC indicate that region will likely experience dry weather and above-average temperatures from July to October. This poses significant risks to wheat production in the country, which is projected to 26.2m tons for 2023/2024 MY according to ABARES, reflecting a substantial decline of 13m tons compared to 2022/2023”, Mr. Parganas said.

He added that “the projected global soybean production for the 2023/24 season is estimated to reach 407.2m tons, marking an 11% increase compared to the previous season with Brazilian soybean exports playing a significant role in supporting the overall activity. In May, Brazil recorded a record-high export volume of 13.7m tons of soybeans, surpassing the five-year average by 23.2%. The positive momentum is expected to continue in the region, albeit at a slightly slower pace, with the second quarter being the peak period for soybean exports. 2022/2023 Brazil soybean exports have reached 62m ton (January-June) with an additional 33m tons anticipating to be exported during the remaining months of this MY. In contrast, the seaborne exports of U.S. soybeans during the 2022/2023 marketing year (September to August) have been underwhelming. Up until now, 42m tonnes have been exported, and there are still 14.4m tonnes left to be exported in the next two months. This potential export activity could bolster Panamax and Supramax trade in the region in the short-term. As for US 2023/2024 MY, competition from Brazil could lead to beginning stocks of more than 123m tons while supply will be constrained to 53.8m tons due to rising completion from South America with $US appreciation playing a major role. In general, soybean exports are expected to be supported by a record supply from Brazil against weaker production in Argentina due to severe drought conditions and lower exports from the US. It is worth noting that the waiting time in Brazilian ports is generally longer compared to ports in the US, which could potentially offset the declined supply”.

Intermodal’s analyst concluded that “summarizing, the global grain trade is gradually gaining momentum after a period of lackluster activity. However, there are still concerns arising due to underperformance in certain loading regions, which may exert some pressure in the second half of 2023 and into 2024. Considering the available data, it is improbable that the grain trade activity will effectively counterbalance the adverse effects resulting from the easing congestion levels and the potential decline in mineral and coal demand”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide