Parana downspout takes cargo volumes to lowest point in last three years

Parana downspout takes cargo volumes to lowest point in last three years

The low level of the Paraná river limits shipments of late maize. Sorghum boasts its highest level of exports in a decade. Persisting negative margins limit Chinese demand for SB.

As a result of the downspout, last month the Paraná River hit its lowest point in 50 years. In this context, likely scenarios for the remainder of the year are far from encouraging. August’s -0.13 meters in height average doesn’t convey that the worst is over. The most critical point for Paraná is expected in Rosario city in November.

This way, the most optimistic forecast expects a level of -0.46 meters for the second-to-last month of the year, while the worst-case scenario it is projecting -1.44 meters, according to the Argentinian National Water Institute (INA). If the latter is met, the situation would be among the most severe downspouts on recorded history, very close to that of 1944, which holds the record as the worst in the series.

In this context, the cargo of the ships that leave the ports of the Hidrovia show a sustained decline. In August, the average load volume was around 28,400 tons per ship for maize, the lowest number in at least three years and one of the lowest on record.

The river level has an important role in determining loading possibilities of each vessels. However, Argentina continues to meet its export commitments even at the cost of absorbing sustained local cost jumps, driven by the deadweight of those ships that cannot complete their maximum load capacity and higher logistics costs due to having to move larger portions of the harvest towards ports outside the Hidrovia area. In this sense, a large part of the late maize had to be shipped through the southern ports of the province of Buenos Aires.

Regarding the foreign trades dynamics, 2020/21 maize has already accumulated almost 34.7 Mil MT in Export Affidavits (DJVE), in line to exceed the total declared throughout the 2019/20 campaign. This way, it would rank as the second campaign with the most recorded exports, with the potential to exceed the 38 Mil MT record for the 2018/19 business year.

For its part, the soy complex shows total exports of 23.6 Mil MT so far. Although this total is in line with last season’s sales, this year we’re finding 1 Mil MT more of soy by-products and 1.1 Mil MT less of beans, thanks to an improvement in crush margins.

Sorghum, record sales in over a decade

With an 88% jump in the planted area, this cereal with a wide-range use for animal feed totals about 980,000 hectares sown for this commercial year 2020/21, estimating to date 3.3 Mil MT of production, the highest since the 2016/17 campaign.

With this favorable outlook, sorghum consolidates exports of almost 1.9 Mil MT so far in the campaign that began in March of this year, the highest sales level in ten years. The robust demand from China over the last few months has been key to stimulating this level of trades. The Asian giant went from importing 25% to 80% of the sorghum traded worldwide in just two years, with almost 8 Mil MT in the current season. With this boost to the world market, the FOB prices published by MAGyP have risen 58.8% in just over a year, from 148 USD/MT to around 235 USD/MT.

The sweet moment that the grain is going through allows us to imagine a jump in the area sown for the new season, which is in a position to reach 1.1 million hectares, the highest coverage in 9 years.

Chinese demand for soy dropped in August

Chinese SB imports grew 9.5% in August compared to July. However, a peak in domestic demand for SB meal for animal feed is expected for the August-September period, given the proximity of winter and various festivals in the Asian giant, but if the we look at the 9.49 Mil MT of SB imported in August 2021, we’ll see they’re clearly lower than the 9.6 Mil MT of August 2020. In fact, as early as July we could start seeing a year-on-year drop of more than 14%.

Furthermore, shipments expected for the coming months do not foresee year-on-year increases, because of the reduced margins of pork production. In Heilongjiang, a key pig producing area in China, margins are already negative. Additionally, soy crushing margins in Rizhao, one of the most important processing centers in China, reached their lowest level in history in June and although they have bounced back, levels continue to be negative, which limits the demand of SB.

This unfavorable context for SB in the world’s leading agricultural importer is already hurting exports from the United States. Having just started the SB campaign in the North American powerhouse, trades accumulate just barely 17.8 Mil MT, far from the 24.2 Mil MT in the same period last season. Of these totals, China has recorded purchases of about 8 Mil MT, even further from the 13.5 Mil MT it had committed last year.

This way, the reduced demand levels is limiting prices, which in the last week showed a drop of 1.8% for SB in Chicago, around 462.5 USD/MT (down from 471.4). For its part, maize also continues its bearish path, falling 2.5% and closing around 195.3 USD/MT in the US market. The local context was not immune to this dynamic and closed the week around 337 USD/MT and slightly below 190 USD/MT for maize.

Source: https://bcr.com.ar/

Photo: REUTERS/Stringer

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