Why we're seeing mixed signals for dry bulk shippers like Navios (Part 9 of 11)
Brazil soybean exports
As a major supplier of soybean in the world, Brazil’s soybean exports are an important factor that affects demand for dry bulk vessels—Panamax in particular. This, in turn, affects the Baltic Dry Index, the Guggenheim Shipping ETF (SEA), and dry bulk shipping companies such as Navios Maritime Holdings Inc. (NM), Navios Maritime Partners LP (NMM), Diana Shipping Inc. (DSX), and DryShips Inc. (DRYS).
Robust exports
While there were concerns that drought would negatively affect the country’s estimated record production this year, soybean exports have been rather robust for the first three months of this year relative to the same period in 2013. During the first quarter of 2014, Brazil exported 9,050 thousand tons of soybean, when the country only exported 4,496 thousand tons of soybean in 2013 over the same period.
Cancellations
Although soybean exports tend to rise and peak in May, as new crops are harvested and sold overseas, Brazil’s soybean exports are expected to fall in April due to China’s recent cancelations, according to industry research from Oil World. This will negatively affect dry bulk shippers in the short term, since China made up about two-thirds of global soybean demand in 2011, according to data from the USDA (United States Department of Agriculture) and Earth Policy Institute.
Droughts
It might also be important to point out that one of the worst droughts in years will also negatively impact Brazil’s soybean exports from October 2013 to September 2014. Based on the USDA’s latest estimates, Brazil’s soybean shipment estimates were revised lower, from 45.00 million metric tonnes in March to 45.50 million metric tonnes in April. However, the USDA upped its estimate for soybean exports from the United States from 41.64 million metric tonnes in March to 43.00 million metric tonnes in April. So, aside from China’s recent cancelations, you could say the soybean trade remains positive for dry bulk shippers.
Browse this series on Market Realist: