February trades for delivered CFR volumes were heard at a 130-135 cents per bushel premium to March CME soybean futures, and maybe as high as 137 and 138 cents per bushel over March CME soybean futures.

March loading sales were heard at 53, 55, 60 and 70 cents per bushel, up from 48 cents per bushel heard paid earlier in the week.

A February-March cargo was meanwhile heard traded at a 97-100 cents per bushel premium, up from 75 cents per bushel a day or two ago.

CME soybean futures, against which most physical cargo sales are priced, have fallen sharply in the last few days on wet weather in Brazil, which is expected to bring some relief to the soybean crop after recent hot, dry weather, as well as favorable weather in Argentina.

“Wide and choppy trading ranges were seen for the US soybean complex today, mainly on positioning ahead of the weekend after grinding sharply lower during the morning because of improving Brazilian weather forecasts,” Terry Reilly, Senior Agricultural Strategist at Marex said in his evening report Thursday.

“Soybeans, soybean meal and soybean oil all ended lower.”

Brazilian farmer sales slower due to crop concerns

A Brazilian analyst meanwhile said slow farmer selling may have contributed to the higher premiums.

“I think it is also because of a lack of farmer selling and concern about the crop failure up north,” Eduardo Vanin, lead soybean analyst at Brazilian brokerage Agrinvest told Agricensus.

“Besides that, Brazilian soybeans for February and March seem too cheap compared to the US.”

The move has also affected FOB premiums in the Brazilian Paranagua paper market, with a surge in the new crop levels.

Premiums for February shipment surged 30 cents per bushel to a 25 cents per bushel discount to March CME futures Thursday, while March followed the same path rising 28 cents per bushel to a 52 cents per bushel discount.

Trades were also heard for March loading at a 60 cents per bushel and 55 cents per bushel discount to futures, with unconfirmed rumors of further trades at a 50 cents per bushel and 45 cents per bushel discount to March futures.

Market sources said the sharp fall in CME futures had indeed played a role in the basis rise, but analysts are also becoming skeptical about the size of the crop Brazil will end up with, leaving fewer volumes to be traded.

One analyst said that it expected the country’s production to reach 162 million tonnes, but that it might be revised lower due to the drought stress in the central-west and excessive moisture in the south, even with better weather conditions forecast in the short term.

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Rates softened to $40.10 per tonne from $40.90 per tonne for the Brazil-Northeast Asia route, while USG rates were flatter at $55.10 per tonne from $55.50 per tonne for the US Gulf-Northeast Asia route.

Many shipbrokers noted that demand for shipping was slowing, putting downward pressure on rates.

“In the South Atlantic, a scarcity of fresh enquiry prevailed, putting pressure on rates, while in the North there was an improvement in cargo availability,” Allied shipbrokers noted in a report on Monday.

Some of the softening is also likely to be a seasonal effect.

For example, in the South Atlantic, record Brazilian exports have begun to tail off.

ANEC projected that in November Brazil would export 5.1 million tonnes of soybeans and 8.3 million tonnes of corn.

While both are still record numbers for the month, they are still a decrease from the 5.5 million tonnes and 8.5 million tonnes that were exported in October.

However, there remains some potential for freight rates to move higher.

Impact of restrictions on the Panama Canal

One obvious factor is the renewed restrictions on the Panama Canal.

There has been no improvement on the Lake Gatun reservoir, which remains at a level of about 80.5 feet after a prolonged drought in Central America, where rainfall has been down 41%.

Vessel limits of 24 per day took effect from November 8, down a third from normal levels, and will be cut further to 18 by February.

The extended period of restrictions could act to support rates as vessels are forced to seek alternative routes.

“We don’t see many ships choosing Suez with regards to bulk carriers so far,” one source said, “but if the situation gets worse with fewer shipments through the canal we should see more charterers choosing Suez and [it] will affect positively rates.”

Another source suggested there was already increased tightness in the North Atlantic as a result.

Droughts have played havoc with logistics globally, with continued concern about low water levels in northern Brazil driving exports south along already crammed export routes.

Logistics in Brazil were not helped by a fire at the Parangua port which knocked one berth out for a week, but Berth 201 is now heard to have resumed operations from the 5th.

One bright spot for logistics has been a recovery in the level of the Mississippi, which should ease the problems barges face from low water levels.

Intermodal shipbrokers noted that US-China soybean trade was one factor that could help to support rates.

US soybean exports have remained strong, with inspections up 2% on the week to 2.09 million tonnes in the most recent release, with 74% headed to China.

Soybean buying in China also sharply picked up this week, with nine to 20 cargoes of US soybeans booked from Monday to Wednesday, with shipment expected between November and March.

In the Black Sea, rates at the Danube ports have seen a significant decrease of about $10 per short tonne to $31 per short tonne.

Increased government inspections have led to fewer cargoes being loaded.

As a result, there are more open vessels seeking cargoes, which has put pressure on the freight rates.

At the Russian ports, prices were relatively stable week-on-week.

Prices from Ukrainian ports had started to fall by Wednesday afternoon.

However, a reported Russian attack on a Ukrainian vessel at port in the Black Sea late on Wednesday has caused significant concern in the market and this has left the situation uncertain.

Freight rates for vessels transporting palm oil to India and China from Southeast Asia have firmed slightly this week although in limited tonnages.

The rate on 18,000-20,000 tonne vessels from Southeast Asia to West Coast India and Pakistan increased by $1-2 per tonne to $45 per tonne on Wednesday, November 3 from a week ago while rates for 10,000-12,000 tonne vessels to East Coast India were flat at $37 per tonne.

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Acreage figures were cut by 1.1% to 7.2 million hectares with output projections down in tandem to 44.9 million tonnes as expected yields were kept unchanged.

“The cut is due to farmers’ uncertainties as low corn prices are not covering production costs,” IMEA said.

The institute added that soybean sowing delays due to adverse weather conditions may also jeopardize corn planting within the ideal window.

IMEA has also reduced domestic corn demand estimates by 0.7% to 46.1 million tonnes.

The reduction came on the back of lower export projections, which were pegged 1.2% below figures set forth in October at 26.9 million tonnes.

Soybean output

IMEA expects Mato Grosso to export a record volume of 27.8 million tonnes of soybeans during the 2022-23 marketing year. At the same time the agency has slightly cut domestic demand compared with the previous report due to a slower crushing pace to date.

The institute now pegs crush estimates for the 2022-23 marketing year at 12.7 million tonnes, only 0.1% below October’s figures.

For the upcoming 2023-24 crop, crush numbers were downgraded by 0.3% to 13.6 million tonnes while inter-state demand was lifted by 1.5% to 3.3 million tonnes.

The institute has not altered its projections for new crop acreage, yields and output, with the latter still pegged at 43.8 million tonnes, but said red flags are up due to weather-related headwinds.

“Over the past month, rainfall levels have been lower than in the same period last year and below what is necessary for the development of crops, leading to planting delays,” IMEA said.

According to the institute, on-the-ground sources said that large areas will need to be replanted and this may influence the decision of farmers regarding what to plant in those areas, especially for those planting second crop cotton.

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As a result, Bage (Buenos Aires Grains Exchange) dropped its wheat production projection to 15.4 million tonnes, from the 16.2 million tonnes estimated in October.

In the week ending November 1, wheat harvest progress moved up 2.5 percentage points to 9.3% complete.

The national average yield is reported at 11 quintals per hectare, amounting to a total national production of 595,000 tonnes so far.

Wheat areas in good-to-excellent condition increased by two percentage points over the week to 13% of the total, and dry areas declined by three percentage points to 43%.

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Sunflower crop

Sunflower intentions were hindered by the lack of humidity in the center and north of the country, as well as by the low temperatures that delayed planting work in the south, which discouraged producers from sowing the crop.

Consequently, Bage has lowered the planting projection by 100,000 hectares to 1.85 million hectares, down 21.3% compared with last year.

Of this new projected area, 51.9% has already been planted, up 3.3 percentage points from last year.

Sunflower areas in good-to-excellent condition added one percentage point to 13% of the total and dry areas decreased by 12 percentage points to 45%.

Corn crop

Planting for corn had a weekly advance of 1.4 percentage points to 23.4% complete.

To date, 1.7 million hectares of the 7.3 million ha has been planted, a slight gain from last year but below the five-year average of 32.2%

Mid-October encouraged early sowing but the optimal planting window in the center of Argentina ended two weeks ago.

In this area, sowing will advance and regain strength at the end of November, with the beginning of late sowing.

Corn areas in good-to-excellent condition moved up by five percentage points to 20% of the total and dry areas declined by two percentage points to 39%.

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“This is all that Paranagua port did not need at the moment, on top of all the delays, rains, etc.,” Daniele Siqueira, grains and oilseeds market analyst at local consultancy Agrural told us.

In a note to clients, shipping agency Williams Brazil said the fire started in the night between Saturday and Sunday at the Terminal CAP, jointly operated by Bunge, and destroyed approximately 400 meters of conveyor belts.

“The incident has caused significant disruptions to operations at the terminal,” Williams said.

The agency added that “while Bunge’s conveyor belts remained undamaged, the junction connecting the two companies for loading at the ship loader was affected, leading to the temporary inoperability of Bunge.”

On its website, Cavalca Port Administration (CAP), which operates the Terminal CAP, published a statement confirming that a fire in its conveyor belts started at around 10 pm on Saturday.

“Our administration reiterates that the terminal was not in operation and the fire was controlled by the municipal fire department team”, said CAP, in the statement.

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Assessing causes and damages

The operator added that the cause of the fire has not yet been identified and is being investigated by the authorities.

When asked for a comment by Fastmarkets, CAP Port Administration added that it concluded the aftermath of the fire yesterday and will now conduct its assessment of the damages.

The company did not offer a projection of when the terminal will restart operating.

Bunge has not yet responded to another request for additional information from Fastmarkets.

According to some sources, the fire has affected the shipping schedule of several vessels, including some carrying soybeans and soy meal; although this information is not confirmed.

In a statement, Portos do Paraná, the public company that administers the ports of Paranaguá and Antonina, said that berth 201, used in Terminal CAP operations, was made available for “alternative operations”.

By “Alternative operations” Portos do Paraná means direct unloading movements, or without the use of belts and ship loaders to move solid bulk.

The berth 201 remained closed Sunday due to security measures.

The other berths in the port continue to operate normally, according to the company.

“Isolations in areas close to the site of the incident will be maintained, due to the damaged structures – which are being analyzed by the companies”, said Portos do Paraná.

The port of Paranagua, one of the Brazil’s key routes for exporting soybeans, corn and soy products to global markets, has been facing severe headwinds for several months.

The fire came as excessive rains had already been adding to large shipping delays resulting from the combination of soybean and corn volumes competing for port capacity.

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Brazilian soybean exports totaled 3.8 million tonnes in October 2022.

The average soybean shipment per working day was 261,486 tonnes last week, higher than the 215,916 seen in the previous week and 30.8% above the 199,907 tonnes average pace from October 2022.

The country’s Grain Exporters Association (Anec) forecasts Brazilian soybean exports to reach 6.6 million tonnes in October, surpassing the 5.2 million tonnes record volume exported in October 2018.

Corn exports

The South American country exported 3.9 million tonnes of corn in the first two weeks of the month, while last October shipments amounted to 6.8 million tonnes, a record volume for the month.

The average exported volume of corn per working day was 443,276 tonnes last week, below the prior week’s average of 469,588 tonnes and up 24.1% from the 357,108 tonnes average in October 2022.

Anec projects Brazil´s corn exports to reach a record 9.1 million tonnes in October.

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Soy meal and oil exports

Brazil’s soy meal shipments amounted to 1 million tonnes in the first two weeks of October, while exports totaled 1.8 million tonnes in the same month last year.

The average pace of shipments per working day was 112,230 tonnes last week, higher than the 95,196 tonnes seen in the prior week and 18.3% above the 94,894 tonnes average in October 2022.

Anec pegged Brazilian soy meal shipments at 1.9 million tonnes in October.

The country’s vegetable oils and fats exports, composed mostly of soy oil, reached 54,492 tonnes in the first two weeks of October.

In the same month last year, Brazilian exports totaled 204,718 tonnes.

The average export pace per working day dropped to 6,055 tonnes last week from 8,662 tonnes a week earlier, and 43.8% lower than the 10,774 tonnes average pace from October 2022.

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Ending stocks of the 2023-24 crop year are expected to total 670 million bushels (18.23 million tonnes) in the October update to the World Agricultural Supply and Demand Estimates (Wasde), which is 55 million bu higher than projected a month ago.

The ending stocks estimate for 2023/24 is slightly higher than the 660 million bu (17.96 million tonnes) projected by analysts surveyed by Fastmarkets Agriculture before the release of the report.

US wheat output is expected to total 1.812 billion bushels (49.3 million tonnes) in 2023-24, which is up 78 million bushels from last month’s estimate and 9.8% higher than 1.65 billion bu projected for 2022-23.

Domestic consumption is projected at 1.159 billion bu (31.5 million tonnes), up 30 million bushels from the September estimate and higher than the 2022-23 forecast of 1.131 billion bushels.

The 2023-24 export estimate was unchanged from last month at 700 million bushels (19.1 million tonnes).

“The season-average farm price is reduced $0.20 per bushel to $7.30 on higher projected stocks and expectations for futures and cash prices for the remainder of the marketing year,” the report said.

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US wheat classes

HRW (hard red winter) wheat production is projected to total 601 million bushels (16.4 million mt) in 2023-24, up from 585 million bushels projected in September.

Hard red spring (HRS) output is projected to reach 468 million bushels (12.7 million tonnes), much higher than last month’s estimate of 413 million bushels.

The USDA pegged soft red winter (SRW) production at 449 million bushels (12.2 million tonnes), up from 440 million bushels a month ago.

White wheat production is expected to total 235 million bushels (6.4 million tonnes), which is down from 239 million tonnes in last month’s Wasde.

Durum output is forecast to come in at 59 million bushels (1.61 million tonnes), up from 57 million tonnes last month.

Global outlook

Global ending stocks for 2023-24 are projected at 258.13 million tonnes, down from 258.61 million tonnes projected last month.

The world is expected to produce 783.34 million tonnes of wheat in 2023-24, which is down 4 million tonnes from 787.34 million tonnes in the September report.

The global production decline is due to lower output in Australia, Kazakhstan, and Ethiopia, which is only partially offset by higher US production.

The Australian production estimate was trimmed by 1.5 million tonnes to 24.5 million tonnes because of lingering dry conditions over most of the growing areas.

“Ethiopia is also lowered 2.0 million tons to 5.5 million on reduced harvested area, dry conditions in August and September, and less input use,” according to the report.

Kazakhstan’s output was reduced by 2 million tonnes to 13 million tonnes because of “suboptimal growing conditions,” according to the USDA.

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Sales of the 2023-24 soybean crop fell by 24.3% to 28,000 tonnes during the week, while sales of the 2022-23 crop decreased 66% to 385,000 tonnes.

The new sales took the total amount for the 2023-24 crop, with 1.2 million tonnes sold, which is 22.6% lower than the 1.5 million tonnes reported at the same point in 2022.

Regarding the 2022-23 crop, 15.3 million tonnes has been sold to date, down 50% from the 30.7 million tonnes sold at the same time last year.

Export license applications for the 2023-24 crop reached 380,000 tonnes, while 251,000 tonnes was reported a year ago.

Applications for export of the 2022-23 crop came to 1.9 million tonnes, lower than the 5.5 million tonnes reached at the same point last year.

Corn sales

Farmer sales of the 2023-24 corn crop fell 1.2% to 160,000 tonnes, while sales of the 2022-23 crop decreased by 43.9% to 773,000 tonnes in the week.

On a cumulative basis, 3.2 million tonnes of the 2023-24 crop has been sold to date, down 37.3% from 5.2 million tonnes seen at the same point last year.

Total sales of the 2022-23 crop reached 25.6 million tonnes, which was 36.7% lower than at the same point last year.

Export license applications for the 2023-24 crop amounted to 430,000 tonnes, while 8.9 million tonnes were issued at the same point in 2022.

Export applications for the 2022-23 crop amounted to 20.7 million tonnes, a 36.3% drop from a year earlier.

Wheat sales

Farmer sales of the 2023-24 wheat crop rose by 76% to 88,000 tonnes during the week, while sales of the 2022-23 crop were down 57.7% at 82,000 tonnes.

A total of 1.7 million tonnes of the 2023-24 crop has been sold so far, down sharply from 5.3 million tonnes at the same point in 2022.

Cumulative sales of the 2022-23 crop reached 12 million tonnes compared with 22.2 million tonnes a year ago.

There were no export license applications for the 2023-24 crop – again in sharp contrast to the 8.8 million tonnes noted at the same point in the previous season.

Export applications for the 2022-23 crop stood at 8.8 million tonnes, down 38.9% from a year earlier.

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Rumors have been circulating among market participants that Russia could be poised to make a return to the grain deal initiative from October 5, after pulling out of the deal back in July 2023.

The deal had originally been signed between Ukraine, the United Nations and Turkey, with a mirror deal signed between Russia, the UN and Turkey, but was allowed to lapse when Russia declined to resign.

The trade rumors, most of which seem to come from Russia-based sources, expect Turkey will guarantee the safety of vessels operating in the Black Sea and, as such, will allow unhindered export of grains and sunflower from both Ukraine and Russia.

More controversially, the rumors also suggest a guarantee that the export of petrol, oil and lubricants from Russia would be included, in return for exports of the same products from the EU into three Ukrainian deep sea ports.

Also, key Russian demands for readmission to the international electronic banking system, SWIFT, and a guarantee of Russian fertilizer exports via Ukrainian ports has been dropped by Russian authorities amid acceptance that there is no possibility of implementing such an arrangement.

Along with that, it was also said that Turkey will process payments for Russian sunseeds and grains through its two state banks, with a 12% commission.

Doubts

However, trade sources spoken to by Fastmarkets Agriculture also suggested that such reports were untrue and claimed there is no reason or incentive for Ukraine to return to the grain deal and give control over the flow of exports back to Turkey, the UN and especially Russia.

Ukraine’s use of marine and aerial drones against Russian ports and shipping in the mainland and in the disputed territory of Crimea has proved a consistent irritant to Russian naval forces and spurred more confidence.

On the back of that, Ukraine declared the opening of its own humanitarian corridor – allowing a wider selection exports than simply grains – in August, initially enabling ships that had been stuck in port since the Russian invasion began to leave.

Since the opening of the humanitarian corridor, eleven vessels have already arrived in Ukraine, and eight of those have left successfully, but there are more expected to enter the region soon, but trade sources expressed fears that recommitting to the grains initiative could slow building momentum.

“The UN only will put the process into frames, which nobody really needs,” a source said.

Another Ukrainian source familiar with the matter said that for now there were only talks about the current humanitarian corridor, while the UN said that for now they could only confirm that negotiations are “ongoing”.

“The UN remains determined to ensure that Ukrainian grains can be exported and reach the global market, for the sake of Ukrainian farmers and the world’s poorest people who need affordable food. These efforts continue in that regard, including through talks with the Russian Federation,” UN representatives said in response to an official request from Fastmarkets.

Trade sources also agreed that it was possible that there be negotiations underway, but still did not expect a final result to be agreed upon and certainly not within the next 24 hours.

Along with that, Russian media RIA News reported that more clarity regarding the status and continuation of the grain deal initiative may appear closer to the end of 2023, but for now, there is no significant progress.

The grain deal initiative was stopped on July 17, 2023, after Russia withdrew from the deal – although significant delays at inspection stages meant that shipments were already significantly delayed – with some ships facing months of waiting at Istanbul.

That had brought accusations from Ukrainian authorities that Russian inspection teams under the Joint Coordination Centre were effectively sabotaging the arrangement by holding up their approvals for as long as possible.

But on August 10, Ukrainian naval forces opened a humanitarian corridor for commercial vessels, with few vessels that had been stuck since the Russian invasion leaving Ukrainian ports in August, before the arrival of eight vessels to load iron ore and grains in September.

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The soybean crush fell 485,000 tonnes month on month to 2.1 million tonnes in August, the lowest level for the month on record.

The country crushed 19.6 million tonnes of soybeans through the first eight months of the year, the lowest level in 12 years and 7.2 million tonnes lower than in 2022.

The backdrop in Argentina’s soybean crush activity in August reduced the country’s industry capacity utilization rate from 43% in July to 35%.

The chamber showed that soybean crush margins that were mostly negative throughout August worsened further in September pressured by falling prices of downstream products on an FOB basis, which will do nothing to encourage a significant pick up in crush activity during the month.

“Crush margins remained negative [in September] due to the decline in international soy meal and soy oil prices while available soybean prices spiked sharply on the back of the soy dollar four, favoring direct soybean exports [to the detriment of downstream products],” Ciara-CEC said.

View our analysis of soybean oil cost and biofuel profit margins

Soybean farmer sales picked up in September fostered by the fourth round of export incentives to the sector, jumping from 750,000 tonnes in August to 3.2 million tonnes.

The new round of sales seems to have benefited direct soybean exports the most, with an increase in the number of soybean trucks arriving at ports in September, equated to about 1.1 million tonnes of beans compared with 454,000 tonnes in August.

Sunflower seeds & sunflower oil

Sunseed crush, meanwhile, remained broadly flat on the month at 404,000 tonnes with the 2.9 million tonnes crushed since the beginning of the calendar year being the largest volume on record.

Corn

Argentine farmers held back corn sales in September while ramping up fresh soybean commitments with corn volumes sold falling from six million tonnes in August, when the sector had its own export incentives, to 1.3 million tonnes.

USD inflows

The inflow of US dollars linked to the exports of grains, oilseeds and downstream products fell 50% during the first nine months of the year, Ciara-CEC said.

This was due both to the massive crop loss faced by the country and to the high basis of comparison as the country’s export income was bolstered in 2022 by the first round of the soy dollar policy.

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