As we approach the end of October, we are beginning to see the seasonality in the soybean and corn trade. Over the past three years, we have seen that the two largest grain exporters, Brazil and the US, have different export windows. More specifically, Brazil's strongest period is in the spring, while US exports have their strongest period in the last quarter of the year.
In terms of the largest trading partners for these exporting nations, China dominates the trade, importing the largest cargoes of soybeans and maize. The Asian powerhouse uses soybeans mainly for animal feed, with annual consumption ranging between 13 and 15 million tonnes. So far this year, China has already imported 96% of last year's soybean and corn cargoes, showing strong momentum as imports so far in October (7,255 kt) are already ahead of the same month in 2021 (6,409 kt) and 2022 (5,101 kt). Average Q4 soybean and corn imports in 2021 and 2022 are 21,973 kt. Therefore, if the trend continues, around 15,000kt will need to be imported in the next two months..
As mentioned above, Q4 is the strongest period for the US and this quarter should be no exception. In addition, this year's harvest is likely to produce a bumper corn crop, which will boost exports. In addition, the grain surplus is likely to increase stocks and lower prices, making both commodities more affordable and boosting the dry bulk trade..
The majority of China's grain imports are on Supramax and Panamax vessels, so if this trade pattern materialises, we could expect a rise in agribulk freight rates.
Focusing on the specific trade between the US and China, despite the strong US soybean trade, corn imports have been taking a steady beating since 2021 and are currently at their lowest level since 2021, with only 70.014 kt sent to China in September and 92.57 kt in October so far.
With corn having lost almost 28% of its value since the start of the year and trading at $486/bushel, close to 3-year lows, there is an opportunity for increased exports, with importers incentivised to take advantage of the discount.
Looking at the big picture, US grain exports are about to pick up speed and this will increase demand for vessels in the northern part of America. Whether it is China or other grain importers absorbing the record corn crop, demand for midsize vessels is likely to increase in Q4.