Viewpoint: Brazil freight rates may rise in 2023

: Agriculture, Fertilizers
22/12/29

The Brazilian grain freight market is expected to show less volatility in 2023 amid forecasts for record soybean and corn crops, causing domestic freight rates to rise, especially during harvest.

The 2022-23 soybean crop is estimated at 153.5mn t, up from 125.5mn t in 2021-22. The second corn crop — the largest in the country — is forecast at 96.3mn t, up from 85.8mn t in the previous year, according to the national supply company Conab.

This should increase demand for freight services, especially after Brazil increases its corn exports to China, leading to higher freight rates.

Grain freight rates were also high in 2022, but mostly because of the increase in diesel prices throughout the year as a result of the Ukraine conflict. The fuel's prices rose by 22pc from the beginning of the year, according to oil regulator ANP.

Several other issues contributed to the increase in freight rates. The soybean crop suffered from adverse weather conditions in parts of the country and produced less than initially expected, decreasing demand for transportation. Road closures also dampened demand, especially after the presidential elections, and weather problems hampered traffic flow on major roads. Thus, grain freight rates oscillated widely during the year.

Market participants expect a more predictable environment in 2023, but some points will still require attention. Grain output may reach a record high, but the pace of forward crop sales for 2022-23 is below the five-year average for this time in the season, especially in Mato Grosso state, Brazil's largest producer. Farmers' sales of soybeans and corn is 13.5 percentage points and 21.5 points below historical levels, respectively, according to data from the Mato Grosso institute of agricultural economics (Imea). Rising diesel prices and transportation conditions on highways and transportation corridors can also increase grain freight prices.

Fertilizer freights

Conditions anticipated for the first quarter of 2023 point to lower fertilizer freight rates in the beginning of the year, but that may shift.

The Ukraine conflict drove producers to bring forward significant volumes of nutrients, as they feared shortages and high input costs. Therefore, inventories will be higher at the beginning of the year, which could lead to fewer imports and lower demand for transport services.

But sources tell Argus they believe the supply of vehicles will be lower, which may increase freight rates.

Brazil's storage capacity has not been growing at the same rate as grain production and fertilizer consumption. Thus, the need for agile and timely loading is growing. These conditions could cause fertilizer freight rates to rise, despite lower import volumes.

Additionally, market participants continue to worry about the tense political situation in the country as President Jair Bolsonaro continued to stir up his supporters even though he will give up his seat on 1 January. Further roadblocks cut curtail transport flows from ports to planting areas.

By João Petrini

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24/12/31

Viewpoint: Supply concerns drive RSO backwardation

London, 31 December (Argus) — Strong export estimates for Australian and Ukrainian rapeseed and canola could offset lower projected levels from Canada, but EU crushers are wary about a supply shortfall for the rest of their 2024-25 crop year. The European Commission forecasts EU 27 rapeseed production at around 17mn t for 2024-25, down from average of 18.2mnt in the previous four crop years. With the EU 27 average rapeseed crush at around 25mn t, based on data from vegetable oil association Fediol, the bloc will need to find 7mn t of rapeseed and canola on the import market for its needs, which include RSO production for transformation into biodiesel. Australia, Ukraine to fill the gap? Australia, which typically delivers 50-70pc of its canola exports to the EU, is forecast to export 4.1mn t in 2024-25, according to the country's agriculture department Abares. Estimates for EU rapeseed imports from major exporter Ukraine vary. The USDA FAS Kyiv earlier this year forecast rapeseed exports from the war-torn country at around 3.6mn t in 2024/25 — a 22pc increase from 3mn t in 2023-24 partly due to expectations of decreased domestic crush levels. Argus estimates this slightly lower, at 3.4mn t — a 6pc increase from its 2023-24 export forecast of 3.22mn t — all of which is likely to make its way to EU countries. But canola production in Canada, one of the EU's key suppliers, is forecast by Statistics Canada at the lowest since 2021-22 at 17.8mn t, probably resulting in an export shortfall compared with previous years. Increased domestic crush levels and rising demand in non-EU countries such as China, Japan and Mexico, which "generally have a willingness to pay more for quality product" according to the USDA — referring to non-GMO treated canola — could reduce EU-bound flows in the coming months. Current- and new-crop RSO in steep backwardation The forward structure between rapeseed oil (RSO) fob Dutch mill current-crop 2024-25 contracts — comprising spot 5-40 days loading and February-March-April (FMA) and May-June-July (MJJ) RSO strips — and the August-September-October (ASO) new-crop contract for 2025 has moved into an unusually steep backwardation in recent months, driven by concerns about rapeseed availability before the start of the 2025-26 crop year. Argus' assessments for the ASO strip were at an average discount of around €80/t ($84/t) to FMA and MJJ contracts as of 13 December. This compares with a curve that saw current- versus new-crop contracts in contango through December 2022 and 2023. This means biodiesel producers will probably have to continue to work with thin margins. Although rapeseed oil methyl ester (RME) fob ARA range prices have followed RSO prices higher, comparatively larger gains on the feedstock outlay have pressured operations. The price spread between spot RME and RSO prices averaged $150/t in the first of half of December, compared with around $200/t in the same period of 2023. Looming agricultural trade barriers Global agricultural trade barriers that have either begun or are planned will be decisive drivers of global vegetable oil prices and trade flows in the new year. China said in September it would start an anti-dumping investigation into canola from Canada. Canola exports from Canada to China are usually between 2mn-4mnt. Indonesia plans to introduce a B40 biodiesel blending mandate in 2025 and has already introduced export permit requirements on palm oil residues, which has sent Malaysian palm oil futures to multi-year highs. In the US, president-elect Donald Trump's announcement about the imposition of 25pc tariffs on all US imports from Canada and Mexico has lead to volatility in the wider vegetable oil complex as well. By Madeleine Jenkins EU rapeseed imports by country of origin mn t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Pupuk Indonesia issues farmers subsidised fertilizers

24/12/31

Pupuk Indonesia issues farmers subsidised fertilizers

Singapore, 31 December (Argus) — State-owned fertilizer producer Pupuk Indonesia has distributed about 7.25mn t of subsidised fertilizers to registered domestic farmers as of 23 December, the company said. The distributed volumes have exceeded the government-mandated target by 0.5pc and include about 3.36mn t of urea, 3.49mn t of NPK fertilizers, 42,700t of specialised NPK formulas, and 46,500t of Pupuk's Petroganik organic fertilizers. Pupuk Indonesia's current fertilizer stock availability for the domestic market is around 1.47mn t as of 23 December, comprising of subsidised and non-subsidised products. Subsidised fertilizer stocks amount to 1.04mn t, consisting of 546,700t of urea, 445,500t of NPK, 16,300t of specialised NPK formulas, and 35,600t of organic fertilizers. Non-subsidised fertilizer stocks are at 428,600t, consisting of 357,400t of urea and 71,200t of NPK fertilizers. Around 400,000t of the current fertilizer stock has also been given to distributors and kiosks to ensure smooth delivery to farmers on 1 January 2025, the company said. The current allocation of subsidised fertilizers at the sub-district level has been finalised at 100pc across all regions, Jekvy Hendra, director of fertilizers and pesticides at Indonesia's ministry of agriculture, said. By Dinise Chng Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Crop-based feedstocks face an uphill battle

24/12/30

Viewpoint: Crop-based feedstocks face an uphill battle

Houston, 30 December (Argus) — US biofuel producers' demand for soybean and canola oil has waned recently, a trend that looks unlikely to reverse in the near term because of domestic policy changes that prioritize lower carbon intensity feedstocks. Expectations that a US renewable diesel boom would drive up demand for vegetable oil led agribusinesses to announce new soybean crush plants and expansions in 2022. Seven new soybean crush plants have come online since then, increasing US nameplate capacity by 10pc to 2.91bn bushels/yr, but new policies have diverged from crop-based feedstocks because of their higher carbon intensity. The California Air Resources Board (CARB) voted to adopt new low-carbon fuel standard (LCFS) targets on 6 November. CARB hiked the carbon-intensity reduction target of California's transportation fuels from 20pc to 30pc by 2030, in hopes of balancing the pool of oversupplied LCFS credits, which alone reduced incentives for crop-based fuels. 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Biofuels produced with lower carbon-intensity feedstocks like UCO, tallow and distillers corn oil receive generous LCFS credits compared to soybean oil and canola oil. That credit premium has led to a surge in UCO and tallow imports into the US , weighing on demand for soybean oil and leading to outcry from farm groups to restrict foreign feedstocks from qualifying for the Clean Fuel Production Credit (CFPC). More challenging is the expiration of the blenders tax credit (BTC) by the end of 2024, which offers $1/USG to biomass-based diesel regardless of the carbon intensity of their feedstocks. The CFPC, also known as the 45Z credit under the Inflation Reduction Act, will replace the BTC in 2025. Unlike the BTC, the CFPC will provide a tax credit based on how low the carbon intensity of the fuel is to a baseline level of 50kg of CO equivalent/mmBTU. This means crop-based diesel fuels will receive far less credit value starting next year than they received for years under the BTC. Some renewable diesel and biodiesel producers are set to idle production in January amid a lack of clarity on how the tax credit changes will impact fuel and feedstock demand. Biofuel and agriculture groups are also waiting final guidance for "climate-smart agricultural practices" and how that would factor into the final 45Z credit for vegetable oil-based biofuels. These climate-smart practices might include no-till farming, planting cover crops, efficient fertilizer use, and more. The US Department of Agriculture recently sent guidelines on climate-smart agricultural crops used as biofuel feedstocks to the White House for final review, giving the industry some hope that they will qualify for a bigger federal credit under 45Z. But how much crop feedstocks will be able to close the gap with waste feedstocks is unclear. US soybean oil futures fell to 39.52¢/lb as of 27 December, down by 17pc from the start of 2024, weighed down by the prospects of a large South American soybean crop and lackluster demand from the US biofuel industry. The US Department of Agriculture's December World Agricultural Supply and Demand Estimates report projected Brazil's 2024-25 soybean production at 169mn t, 10pc higher compared to the prior year. Argentina soybean production was forecast at 52mn t, up by 7.9pc from a year earlier. Soybean planting is ongoing in both regions, with Brazil at 98pc completion as of 22 December and Argentina at 85pc as of 26 December. Some relief from falling soybean oil future prices has come from increased US soybean oil exports, driven by palm oil prices hitting their highest level since 2022. US export commitments for soybean oil were at 526,630t as of 19 December, nearly surpassing the US Department of Agriculture's currently projected level for 2024-25 marketing year. Mexico is among the major buyers of US soybean oil, but if president-elect Donald Trump imposes 25pc tariffs on imports from Mexico , retaliatory action could affect soybean oil demand. Despite the support from soybean oil export sales, the vegetable oil industry will still need support from the US biofuel industry for prices to recover. And should palm oil prices fall, US soybean oil producers will not be able to rely as much on international markets, leaving them to lean more heavily on fighting for changes in US biofuels policy. By Jamuna Gautam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US acid market in west to east split in 2025

24/12/30

Viewpoint: US acid market in west to east split in 2025

Houston, 30 December (Argus) — Vastly different dynamics are expected for the western and eastern US sulphuric acid markets in 2025. Lower output from producers in the western US and Canada will keep supply constrained for much of 2025, likely driving west coast US sulphuric acid imports higher during the year. But balanced dynamics will keep the southeastern US and Gulf coast markets competitive, shielding both regions from the global market dynamics. Deliveries of sulphuric acid to the US west coast from January-October of 2024 climbed by 35pc on the year to 188,700t, according to US Census data, making up for lower-than-expected output from producers, which squeezed availability throughout the region. The closure of Simplot's Lathrop, California, sulphur burner at the beginning of 2024 had already reduced baseline supply on the US west coast. Market sources expect output at Teck's Trail Operations in British Columbia, Canada, to be reduced through at least the first half of 2025 because of technical issues with the facility's electrolytic zinc plant following a fire in late September. Sources said that less volumes were available from the company's western Canadian facility during annual contract negotiations this year as a result. In its third quarter earnings release Teck reduced outlook for 2024 zinc production from its Trail Operations facility by 13.3pc as a result of the fire at the plant, but has not provided guidance for byproduct acid production or zinc production in 2025. In Utah, lower output from Rio Tinto's 1mn t/yr Kennecott smelter is expected to continue into 2025. Reduced copper ore quality has contributed to lower copper concentrate production from the facility. The company is expected to continue to purchase copper concentrate from a third-party supplier to support smelter utilization. Balance rules in the east But in the eastern US, steady output from domestic producers has matched, and sometimes outpaced, demand in the region. This trend has kept prices relatively steady and spot import demand reduced from previous levels. Despite a 6.3pc year to year increase to total US sulphuric acid imports during January-October to 2.9mn t, the bulk of the increase came from higher volumes of spot imports into Houston, Texas, according to US Census data. Deliveries to other major ports in the US Gulf and east coast sank by 28pc. Deliveries of sulphuric acid into the port of Houston from January-October jumped to 264,200t, more than doubling the 115,100t arriving during the same period in 2023. Sulphuric acid imports to other ports in the Gulf coast and east coast fell significantly from January-October, dropping by 28pc to 359,800t compared with 497,900t during the same time in 2023. Spot trade into the US Gulf coast and southeast has been quiet for much of the year, aside from consistent spot shipments into Houston. Market participants expect the balanced nature of the market to continue through much of 2025, reducing the need for imports on contract and spot basis. Prices in a tightly-supplied global merchant market remain largely uneconomic for US-based distributors. The imbalanced relationship of prices in the US and the merchant market has kept bids far from offers, slowing spot trade into the Gulf coast and southeast. By Chris Mullins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

QatarEnergy Marketing raises Jan sulphur price by $3/t

24/12/30

QatarEnergy Marketing raises Jan sulphur price by $3/t

London, 30 December (Argus) — State-owned QatarEnergy Marketing raised its January Qatar Sulphur Price (QSP) to $166/t fob, up by $3/t from December's $163/t fob Ras Laffan/Mesaieed. The January QSP implies a delivered price to China of $185-191/t at current freight rates, which were last assessed on 19 December at $19-21/t to south China and $23-25/t to Chinese river ports for a 30,000-35,000t shipment. The announced monthly QSP fob price has risen by $92/t over a year, from $74/t fob Qatar in January 2024. By Maria Mosquera Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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