Argentinian soybean sales surge following new government measures

Argentina’s government took steps to boost soy exports last week to replenish depleted foreign currency reserves and meet debt obligations. Soy farmers are being offered a preferential exchange rate of 200 pesos per dollar until 30 September, considerably higher than the official rate of around 140 pesos. Financing costs are also being raised for farmers stockpiling soybeans. Producers holding more than 5% of their output will face a minimum financing rate equivalent to 120% of the official rate.

Dry weather and high input costs led to a relatively poor soybean crop of 44 MMT in the 2021/22 marketing year according to the USDA, 9.5% below the 5-year average.  With inflation rates surpassing 70%, farmers have also been delaying sales of the crop. As a result, Argentinian soybean and soymeal exports on dry bulk vessels fell 23.8% YoY in August, totaling 1.6 MMT. The majority of this was processed soy meal, with Argentinian producers typically opting to crush soybeans domestically. Stocks have rapidly been offloaded since the measures entered into force on 5 September. The Rosario Stock Exchange reported soybean sales of 4.6 MMT from 5-9 September, up from 667k tonnes the previous week. With Argentinian soybeans offered at a discount to Brazilian and US crops, Chinese buyers are likely taking advantage of the increased supply. Panamaxes could particularly benefit if producers opt to export unprocessed soybeans to quickly take advantage of the preferential rates, with around 80% of global soybean trade historically shipped on this vessel size.

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Australia declares La Nina weather event

Australia’s Bureau of Meteorology has officially declared a La Nina weather event for the rest of the year, with models indicating a return to neutral conditions by 2023. The weather phenomenon is expected to increase the frequency of storms and rains in the key coal producing region of eastern Australia over the coming months. It also increases the likelihood of tropical cyclones in the north of the country. Australian coal output has already been disrupted by heavy rains over the last year causing flooded mines and damaging rail tracks. Australian coal exports totaled 29.4 MMT in August, down 8.9% YoY. Of this, 11.9 MMT were shipped to Japan, 4.9 to India, and 3.2 to South Korea. While rail shipments and mining operations have now returned to normal capacity, exports in August increased 28% MoM. However, the saturated ground and filled water storage facilities mean mines remain vulnerable to further rainfall.

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US railroads reduce freight services ahead of possible strike action

US railroad operators have begun reducing some freight services ahead of a potential strike later this week. Rail operators have also suspended the transport of hazardous materials, such as fertilizers, to prevent them getting stuck on the network if strikes go ahead. Two of the largest rail unions, collectively representing over 57,000 conductors and engineers, are holding out in contract negotiations. Failure to reach agreements by the expiry of their current contracts on Friday will open the door to strike action. Industrial action would grind US supply chains to a halt, with around a third of US freight transported on its rail network.

For dry bulk shipping, the most significant disruptions would be to coal and grain exports.  The US is entering its fall harvest season for crops including soybeans and corn, while coal mines have been trying to ramp up production to meet increased European demand. US dry bulk exports totaled 24.6 MMT in August, up 22.2% YoY. Of this, 6.6 MMT of coal was exported, a rise of 14.2% YoY, while grain exports were up 35.2% YoY, at 8.6 MMT.