Dry Bulk Market: Mixed Conditions Ahead For Corn Export Routes

Corn main export markets are facing various weather challenges, which could in turn result in changes in cargo demands. In its latest weekly report, shipbroker Intermodal said that “due to the adverse weather outlooks expected in August, there has been a 1% decrease in the projected U.S. corn production for the 2023/24 season, bringing the estimated total to 367 million tons. The weather forecasts indicate that the U.S. Corn and Soybean belts will continue to experience hot and dry conditions, particularly raising concerns for the northernmost corn and soybean regions where crop development is still in progress. Unfortunately, these areas have the highest likelihood of facing combined hot and dry weather, which poses significant challenges to agricultural prospects. Regarding corn exports, the data for June reveals a substantial decline, with volumes plummeting to 3.4 million tons (34.7% below the 5-year average and the second lowest in the past 10 years). This reduction in U.S. corn exports can be attributed to decreased purchases by China, which only imported 0.5 million tons in June. Up until now, a total of 34.2 million tons of corn have been exported from the U.S. for the 2022/2023 MY, out of the projected 44.2 million tons, with an estimated 49.7 million tons for the 2023/2024 MY”.

Source: Intermodal

“In contrast, Brazil is poised to increase its share of the global corn market and potentially surpass the US as the world’s leading corn exporter. This would mark the second time Brazil has achieved this feat, the first being in the drought year of 2012/2013. U.S. corn exporters are facing considerable challenges due to stiff competition from cheaper Brazilian supplies and the impact of a strong dollar, which makes their produce more expensive for international buyers. Brazilian corn offers are currently $30 per metric ton below U.S prices, exacerbating the competition. Brazil’s corn export performance has been remarkable, with June exports reaching 1.2 million tons, surpassing the 5-year average by 33.5%. July is projected to witness even higher exports of approximately 6.5 million tons, second only to the record of 6.7 million tons set in July 2019. Cumulatively, for the 2022/2023 MY, it is estimated that Brazil will export a total of 52.3 million tons, with 6.7 million tons already exported so far”, said Mr. Yiannis Parganas, Head of the Research Department of Intermodal.

He added that “as for Argentina, adverse weather conditions have resulted in a considerable decrease in its corn production. For the 2022/2023 marketing year (MY), the estimated corn production stands at 34 million tons, compared to the 50 million tons recorded during the previous year (2021/2022). This decline in production has significantly impacted export volumes. So far, only 9 million tons have been exported, which is substantially lower than the average of 22.7 million tons for this point in the year. Looking ahead to the remaining months of the current MY, it is predicted that a total of 12.4 million tons will be exported. However, this export estimate could be influenced by the activation of the Agro Dollar program, which sets the Argentinian Peso at 340 pesos per one US dollar. The implementation of this policy raises concerns about its potential impact on the country’s grain trade”.

Source: Intermodal

According to Mr. Parganas, “Brazilian corn exports are expected to play a crucial role in compensating for the lost productions of both the US and Argentina while with the expiration of the Black Sea grain deal, there may be significant disruptions to Ukrainian corn exports. This situation creates an opportunity for Brazil to step in and fill the void in the global corn market left by these countries. Regarding vessel utilization, both the US and China are using Kamsarmax vessels to transport their corn cargoes to China. This sector is being utilized at 85% from Brazil and 95% from US. If Chinese demand shifts towards Brazilian corn, it may not lead to a radical change in the shipping sector’s share, as Kamsarmax vessels can still accommodate the increased demand, while, although there is a decrease in the distance between Brazil and China, this reduction may be counterbalanced by the increasing waiting times experienced at Brazilian ports when compared to the waiting times at ports in the United States”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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