Risks mounting for Brazil soy exports

The global coronavirus pandemic has not yet affected this season's forecast for Brazilian soybean exports, as China's appetite remains high. But disruptions to maritime transportation are now possible as a result of the virus.

As of this week, nearly 22mn t of the oilseed has been committed for exporting via Brazilian ports through the current 2019-20 cycle, according to market participants, compared to about 18mn t a year earlier.

The quantity will eventually increase given vessels' confirmations for loading operations in the coming months — April-May is usually the peak of shipments from Brazil.

Through mid-March this year, Brazil has exported 13mn t of soybeans, grains exporters association Anec said.

The country is poised to ship a total of 77mn t of the oilseed this season, the US Department of Agriculture (USDA) said last week, making no change to its February estimate. The majority of exports are expected to go to China, as around 80pc of annual soybean imports to Beijing come from Brazil.

China's demand for the Brazilian oilseed seems to be steady despite the coronavirus outbreak, which began in the Chinese province of Hubei and has infected 220,000 people and killed nearly 9,000 worldwide.

Chinese soymeal inventories are at low levels. The country may have have passed the peak of its coronavirus outbreak, in which case demand could grow. And the Brazilian oilseed is currently the cheapest in the world, given the depreciation of the Brazilian real against the US dollar and new taxes on Argentinian exports.

Doubts on maritime transportation

There could be obstacles to fulfilling Chinese demand via maritime transportation in the near term, something that was not a factor at the beginning of the coronavirus outbreak in January.

Some operations at Brazilian ports are at risk. On concerns about the pandemic, stevedores at the port of Santos in Sao Paulo state have threatened to cease working. Such a decision could be followed by other terminals across the country.

Santos is the largest port in Latin America and the main conduit for exports of the Brazilian soybean, along with Paranagua, in the southern state of Parana.

Vessels with a sick crew member could face a delay to berth. The US Coast Guard advised this week that such delays are possible for vessels at US ports, a factor that is likely to occur in other countries as well.

Maritime freight rates for shipments to China have been increasing, potentially reflecting the health risks. The Argus freight dirty Brazil-China (260,000t) rate, for example, has jumped by 285pc since the beginning of March.

Brazil is finishing its 2019-20 harvest, and current expectations are for a record soybean crop of more than 124mn t.

By José Roberto Gomes