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The impact of recent Argentine soybean production losses on the dry freight market

This article examines recent progress and initiatives by the shipping industry to meet new IMO targets and provides Signal Ocean Platform data on emissions developments and trends.

The Signal Group
April 2, 2024

Recent forecasts for soybean production in Argentina are creating uncertainty in commodity flows as the Chinese opt for alternatives to replace losses. The drought in Argentina threatens wheat production as farmers face severe droughts and lack government support. The Financial Times reported back in November that Argentine grain exports are now in their third year of drought, while the recent widespread impact of severe weather has led to lower-than-expected global estimates for Argentine wheat production.

Overall, Argentine wheat production is expected to decline in 2022-2023. The Argentine Chamber of Commerce of Rosario (BCR) lowered its forecast for Argentine wheat production by 300,000 to 11.5 million tonnes, while the U.S. Department of Agriculture (USDA) cut Argentine production by nearly one-fifth to 12.5 million tonnes in its December report due to continued widespread drought. reported this would be the lowest production since 2015/16. Canadian production is forecast to be down 1.2 million tonnes to 33.8 million tonnes, the third-largest crop since records began, according to the latest estimate from Statistics Canada. Australian production is forecast to increase by 2.1 million tonnes to a record 36.6 million tonnes, based on the latest forecast from the Australian Bureau of Agricultural and Resource Economics (ABARES) 

I. Dry Bulk Flows - Agricultural Production

The Panamax, Supramax and Handysize vessel categories account for a significant portion (image 1) of the monthly volume (in tonnes) of agricultural bulk flows from all origin countries to all destinations. November ended on a downward trend, and the first 20 days of December still point to slower growth, while production in Argentina and Canada remains uncertain.

Image 1 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, By vessel class https://app.signalocean.com/dry/dynamic/drybulkflows

Looking at the main countries of origin and destination of agricultural production (image 2), Brazil, the United States, and Argentina are the top three countries of origin, with 20%, 18%, and 11%, respectively. China is the main importer, accounting for 24.5% of global agricultural flows, and other Asian countries such as Japan (5%), Egypt (4%), and Turkey (3%) account for the smallest shares.

Image 2 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, Origin - Destination Countries https://app.signalocean.com/dry/dynamic/drybulkflows

Wheat, corn, and soybeans are the major grain commodities with significant percentages of total global agricultural bulk flows from all origin countries to all destinations, with the Panamax ship class accounting for 34%. Soybeans rank third in cargo grades with an 18% share, after wheat (30%) and corn (22%).

Image 3 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, Vessel Class - Cargo grades https://app.signalocean.com/dry/dynamic/drybulkflows

II. Freight Market: Ballasters to South Africa vs Panamax ($/d) rates

The latest picture of the Panamax market for a Singapore roundtrip via Altantic shows a downward trend, as the number of ballast vessels has increased to over 70 since mid-December and rates have fallen to $13.5k/day. However, it appears that the freight market is less influenced by the trend in the number of ballast vessels and more by daily cargo volumes, demand. (image 4).

As shown in the chart below, the number of ballast ships was even higher in previous months, but at that time rates ($/day) were at a firmer level as the daily volume shipped (3-week moving average) was higher than today's decreased level (373k tonnes). The latest daily shipped volume figure is one of the lowest since the beginning of the year and has put pressure on freight rates for the last quarter of 2022. It is interesting to note that in mid-May, the number of ballast vessels was close to 100, but rates were at $30k/day, as daily shipped volumes reached one of the highest levels at that time (500k tonnes and above), while demand remained at similar high levels until the beginning of the fourth quarter.

Image 4 - Data Source: The Signal Ocean Platform, Supply - Ballasters, Demand & Freight ($/day) https://app.signalocean.com/dry/dynamic/p6

In our third and final section of this analysis, we show a sensitivity analysis on supply and demand scenarios that will have a decisive impact on freight rates in the coming months of the new year.

III. Supply Vs Demand Scenarios 

The recent weakness in daily cargo volumes that we have observed for the Panamax South Atlantic market has heightened concerns about freight rate trends. In our pessimistic scenario (Figure 5) with daily loadings of 380,000 tons, the supply of vessels for the next 20 and 40 days is lower than the demand and risks weaker dynamics in expected freight rates. However, the baseline scenario with 480k tonnes of daily cargo from the South Atlantic is the level that can potentially lead the market to firmness, as we have also seen in the second quarter of 2022.

Image 5 - Data Source: The Signal Ocean Platform, Supply - Ballasters, Supply - Demand Scenarios https://app.signalocean.com/dry/dynamic/p6

It remains to be seen how the supply/demand balance will affect freight rate developments, as the recent drought in Argentina has had a major impact on daily cargo volumes from the South Atlantic following the end of the summer season.

You can monitor more on the Panamax South Atlantic (P6_82k) market in our dashboard here: https://app.signalocean.com/dry/dynamic/p6

-Republishing is allowed with an active link to the source

Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert
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Increased Use of Renewable Energy:

Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.

Collaboration and Industry Partnerships:

Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.

To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.

Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.

Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.

Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert

Increased Use of Renewable Energy:

Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.

Collaboration and Industry Partnerships:

Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.

To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.

Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.

Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.

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The impact of recent Argentine soybean production losses on the dry freight market

Posted by
Maria Bertzeletou
|
December 22, 2022

Recent forecasts for soybean production in Argentina are creating uncertainty in commodity flows as the Chinese opt for alternatives to replace losses. The drought in Argentina threatens wheat production as farmers face severe droughts and lack government support. The Financial Times reported back in November that Argentine grain exports are now in their third year of drought, while the recent widespread impact of severe weather has led to lower-than-expected global estimates for Argentine wheat production.

Overall, Argentine wheat production is expected to decline in 2022-2023. The Argentine Chamber of Commerce of Rosario (BCR) lowered its forecast for Argentine wheat production by 300,000 to 11.5 million tonnes, while the U.S. Department of Agriculture (USDA) cut Argentine production by nearly one-fifth to 12.5 million tonnes in its December report due to continued widespread drought. reported this would be the lowest production since 2015/16. Canadian production is forecast to be down 1.2 million tonnes to 33.8 million tonnes, the third-largest crop since records began, according to the latest estimate from Statistics Canada. Australian production is forecast to increase by 2.1 million tonnes to a record 36.6 million tonnes, based on the latest forecast from the Australian Bureau of Agricultural and Resource Economics (ABARES) 

I. Dry Bulk Flows - Agricultural Production

The Panamax, Supramax and Handysize vessel categories account for a significant portion (image 1) of the monthly volume (in tonnes) of agricultural bulk flows from all origin countries to all destinations. November ended on a downward trend, and the first 20 days of December still point to slower growth, while production in Argentina and Canada remains uncertain.

Image 1 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, By vessel class https://app.signalocean.com/dry/dynamic/drybulkflows

Looking at the main countries of origin and destination of agricultural production (image 2), Brazil, the United States, and Argentina are the top three countries of origin, with 20%, 18%, and 11%, respectively. China is the main importer, accounting for 24.5% of global agricultural flows, and other Asian countries such as Japan (5%), Egypt (4%), and Turkey (3%) account for the smallest shares.

Image 2 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, Origin - Destination Countries https://app.signalocean.com/dry/dynamic/drybulkflows

Wheat, corn, and soybeans are the major grain commodities with significant percentages of total global agricultural bulk flows from all origin countries to all destinations, with the Panamax ship class accounting for 34%. Soybeans rank third in cargo grades with an 18% share, after wheat (30%) and corn (22%).

Image 3 - Data Source: The Signal Ocean Platform, Dry Bulk Flows, Agricultural Products, Vessel Class - Cargo grades https://app.signalocean.com/dry/dynamic/drybulkflows

II. Freight Market: Ballasters to South Africa vs Panamax ($/d) rates

The latest picture of the Panamax market for a Singapore roundtrip via Altantic shows a downward trend, as the number of ballast vessels has increased to over 70 since mid-December and rates have fallen to $13.5k/day. However, it appears that the freight market is less influenced by the trend in the number of ballast vessels and more by daily cargo volumes, demand. (image 4).

As shown in the chart below, the number of ballast ships was even higher in previous months, but at that time rates ($/day) were at a firmer level as the daily volume shipped (3-week moving average) was higher than today's decreased level (373k tonnes). The latest daily shipped volume figure is one of the lowest since the beginning of the year and has put pressure on freight rates for the last quarter of 2022. It is interesting to note that in mid-May, the number of ballast vessels was close to 100, but rates were at $30k/day, as daily shipped volumes reached one of the highest levels at that time (500k tonnes and above), while demand remained at similar high levels until the beginning of the fourth quarter.

Image 4 - Data Source: The Signal Ocean Platform, Supply - Ballasters, Demand & Freight ($/day) https://app.signalocean.com/dry/dynamic/p6

In our third and final section of this analysis, we show a sensitivity analysis on supply and demand scenarios that will have a decisive impact on freight rates in the coming months of the new year.

III. Supply Vs Demand Scenarios 

The recent weakness in daily cargo volumes that we have observed for the Panamax South Atlantic market has heightened concerns about freight rate trends. In our pessimistic scenario (Figure 5) with daily loadings of 380,000 tons, the supply of vessels for the next 20 and 40 days is lower than the demand and risks weaker dynamics in expected freight rates. However, the baseline scenario with 480k tonnes of daily cargo from the South Atlantic is the level that can potentially lead the market to firmness, as we have also seen in the second quarter of 2022.

Image 5 - Data Source: The Signal Ocean Platform, Supply - Ballasters, Supply - Demand Scenarios https://app.signalocean.com/dry/dynamic/p6

It remains to be seen how the supply/demand balance will affect freight rate developments, as the recent drought in Argentina has had a major impact on daily cargo volumes from the South Atlantic following the end of the summer season.

You can monitor more on the Panamax South Atlantic (P6_82k) market in our dashboard here: https://app.signalocean.com/dry/dynamic/p6

-Republishing is allowed with an active link to the source

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