BRAZIL LEADS GRAIN EXPORTS DURING THE FIRST 4 MONTHS OF 2023

United States and Argentina mark drastic drop in export volumes

As for seaborne grain shipments in the 4M-2023 period, Brazil has vaulted to the top spot with a 16.8% y-o-y increase in exported volumes totaling 48,300 mt, surpassing even the United States, which fell sharply -22% (36. 800 mt) compared to the January-April 2022 period, the same as Argentina, whose soybean and corn grain exports contracted -54.5% (10 thousand mt) as a result of adverse weather conditions resulting from droughts due to the La Niña phenomenon. Thus, planting delays in Argentina of about one month from the average, due to arid conditions in November 2022, paved the way for Brazil, which has been filling the gaps left by Argentina. According to AXS data published in the most recent issue of BRS Bulk, in 4M-2023, Kamsarmax grain shipments (79-85K dwt) out of Argentina fell by 46 shipments (-3.8mt y/y). Other losses were evenly split between Panamax (68-79K dwt), Ultramax (60-68K dwt) and Supramax (50-60K dwt), with an average loss of 1.84mt.

Challenges in the U.S.

U.S. farmers looking to increase their corn and soybean production face potential challenges. Brazil is rapidly becoming the leading corn exporter and has already surpassed the U.S. in 2022 as the largest exporter of soybeans. Therefore, the U.S. could face stiff competition and oversupply, which could lead to a price war if demand from the Far East (mainly China) does not improve substantially. In addition, persistent inflation could put upward pressure on U.S. farmers’ production costs, limiting future crop expansion.

Between 2020 and 2021, Chinese demand for U.S. corn soared due to the need to 1) rebuild its hog herd (following the 2018 African swine flu) and 2) replenish its state reserves. During this period, Chinese hog and crush margins largely supported trade volumes, but since late 2022 these numbers have plummeted, which explains why U.S. corn has declined in recent quarters. This is reflected in China’s recent cancellation of more than 0.5 million tons of U.S. corn in favor of cheaper Brazilian corn, which has led to a significant decline in corn futures, which have lost nearly 9%. “Going forward, this may erode the already sluggish prospects for grain exports from the U.S. Gulf, particularly on the transatlantic and border routes, as buyers count on the strong Safrinha crop,” BRS Bulk warns.

Second, third and fourth place

While Argentina and the United States struggle with adverse weather and political-trade conditions, Canada, Russia and Australia, as well as Brazil, enjoy generous increases in their substantial exports over the same period in 2022. Even as grain shipments out of Canada grew by 111.8%, volumes reached 14,600 mt, while Russia recorded an increase of 100.9% at 17,700 mt and Australia’s 17,500 mt was 15.2% higher than in January-April 2022.

Canada’s growth goes hand in hand with wheat exports, especially from NOPAC (through the ports of Vancouver and Prince Rupert), to the Far East, China and Japan and other regions (e.g. South America), while Argentina’s wheat exports decline. “However, it should be noted that Canada’s improved wheat production may be insufficient to offset Argentina’s losses,” BRS Bulk notes. Overall, Kamsarmax-Handymax ex-Canada grain shipments gained significant momentum, with a total increase of 111.8%.

Meanwhile, Russia maintains its title as the world’s largest wheat supplier even in spite of the current conflict with Ukraine and the sanctions applied by the EU, which have not stopped the Russian grain trade, although BRS Bulk warns that it is likely that in the face of international trade impediments, Russia will not be able to maintain the current pace of exports in the second half of 2023.

For its part, Australia has benefited from high commodity prices and near-record production in recent years, a situation that could extend into 2023. Overall, wheat and rapeseed (canola) have boosted Australian exports, and demand for Australian rapeseed is likely to increase in May 2023. “The Australian grain market is therefore likely to reach a new peak, leading to Panamax/Kamsarmax vessel activity levels comparable or higher than those seen in MY 2021-2022. However, despite these large volumes, ton-miles are not expected to increase materially due to the shorter sailing distance to their main buyers, the Far East and Southeast Asian countries,” BRS Bulk’s analysis points out.