Brazil shipped a record volume of soybeans in March, providing a “bedrock” for panamax demand recently, but earnings remain under pressure, a new report from Braemar ACM shows.
Following a record 124m tonne soybean harvest in Brazil, shipment volumes over March topped 13m tonnes according to Refinitiv data, up by 32% year-on-year. Most shipments headed for China. This marks a new record in monthly volumes from the largest soy exporter and comes as the local currency is very cheap compared to the US dollar.
The past few weeks have seen heavy buying activity from Chinese end users in the animal feed sector, Braemar ACM noted.
“Chinese industrial activity seems to be rebounding from the strict lockdowns in place for most of Q1 due to the covid-19 outbreak, bringing a resurgence in feed demand from animal agriculture. This, combined with China’s concerted effort to rebuild its pig herd over the past few months following the Swine Flu outbreak last year, has brought soybean and soymeal stocks to 10-year lows. Crushing margins meanwhile are at 10-year highs, continuing to drive demand for imported beans,” the report stated.
Moreover, inland transportation in Brazil was hampered by bad weather for the first few weeks of the year, pushing back some February cargoes.
The problem for panamax owners is that a swelling tonnage list in the region has kept a lid on returns.
Over February and March Braemar ACM recorded a 60% year-on-year jump in the number of panamaxes ballasting into the Atlantic.
April is predicted to be another strong month for Brazilian soybean volumes.
Concluding, researchers at Braemar ACM looked at China’s demand recovery and how that might play out globally in the coming months as the Covid-19 outbreak eventually recedes.
“If China’s experience is anything to go by, grain demand seems to be the prone to a sharp recovery once a country’s activity rebounds from Covid-19,” the report concluded.