Delayed Brazil soy harvest raises concern

A rainfall-delayed Brazilian soybean harvest is raising concerns of crowded ports, impacts on maritime freight rates and export fob premiums, all while a trucker's strike looms.

The soybean harvest pace in the top global producer and exporter of the oilseed is still tepid, having reached 1.9pc of the more than 38mn ha sowed this season, far behind the 8.9pc seen by this time last cycle, according to Brazil's consultancy AgRural.

Rains have been concentrated in the southern states of Parana and Rio Grande do Sul and in parts of Mato Grosso, Brazil's top grower of the commodity. In the last two weeks, western Mato Grosso recorded up to 120mm in rains. Parana, in turn, had more than 200mm in some regions, says the US National Oceanic and Atmospheric Administration (NOAA).

Such a delay is expected to sharply reduce the flow of the oilseed towards Brazilian ports for overseas shipments in February. Moreover, there are reports of damaged beans because of excessive rainfall which would fall below export sales standards. As a result, trading companies will probably need to wait for later supply to fulfill commitments, brokers and consultants told Argus.

For now maritime agency Williams' lineup points to nearly 4mn t of soybeans to be exported from Brazilian ports in February. But market participants anticipate that part of this volume will need to be postponed for March given the short-term lack of the product.

Fears include potentially crowded ports next month and even in April as other vessels arrive to be loaded.

Some sources indicate maritime freight rates from Brazil to China have already increased by around 12pc, while export fob premiums in the Paranagua paper market have fallen to 30-40¢/bu from 50-60¢/bu by the beginning of the year — in part because of higher futures on the Chicago Board of Trade (CBOT).

An added stress to the market is the potential truckers' strike, which could cut the flow of Brazil's most valuable commodity as road transportation accounts for around 60pc of the country's transportation of all goods.

Some truckers told Argus there is less chance of repeating the 2018's nationwide strike. Amid the soy harvest in Mato Grosso, for example, they said the chances of a stoppage are "zero", not only because of the rush to move oilseed but also because of the Covid-19 pandemic, given the necessity of transporting commodities and other products in such difficult moment.

There are also many trucking groups that disagree with the strikers. Most likely, drivers who are employed by large carriers will work normally, while self-employed drivers are expected to strike as of today.

Amid this dispute, the federal government has reaffirmed its willingness to negotiate with the industry over its concerns. There is even the possibility of reducing the tax on diesel to meet one of the truckers' demands.

Brazil is on track to produce more than 130mn t of soybeans in the current 2020-21 season, with exports topping 85mn t, according to Brazil's agricultural statistics agency Conab.

By José Roberto Gomes and João Petrini