Ocean freight rates, COVID resurgence ding soy exports

Continuing severe drought in the Dakotas and Minnesota reduced soybean quality and production in those states, lowering estimates of both quality and production in the U.S. Department of Agriculture’s latest World Agricultural Supply and Demand Estimates.

Soaring ocean freight rates and port congestion related to new COVID-19 restrictions in China and elsewhere combined to slightly slow soy exports from the United States to China over the summer.

However, soybean exports still remain at record levels. Just before the releases of the WASDE by USDA, repots came in of 2.57 million metric tons in further sales, according to Mac Marshall, vice president of market intelligence for the United Soybean Board. The latest official census data shows that accumulated exports through June 30 were 59.4 million metric tons, close to the record set in 2016-17.

In the new soy crop, continuing dryness and heat in the Dakotas and northern Minnesota reduced yield estimates by about half a bushel per acre. Throughout the drought states of North Dakota, South Dakota and Minnesota, only 13% of the soy crop was rated good or excellent. Final yields will depend on weather in the last few weeks of August. However, Indiana, Illinois and several other states in the central Midwest are continuing to project record yields.

Ending stocks were revised slightly upward, to 25 million bushels. World ending stocks were at 25% of usage, not much above 2012 levels.

Port congestion

China slightly lowered its estimate of soy imports down by 1 million metric tons. During an Aug. 12 webinar by the U.S. Soybean Export Council, panelists spent some time on port congestion in China resulting from renewed restriction due to a resurgence of the Delta variant of COVID-19, which has been detected in more than a dozen Chinese cities. The congestion has helped ocean freight rates to soar, slowing some soy export movements.

According to Reuters, congestion in China’s top two container ports Shanghai and Ningbo is worsening following the shutdown of a container terminal in Ningbo where a COVID-19 case was recently detected. Shanghai terminals are reportedly seeing the worst congestion in three years, with 30 vessels queuing outside Yangshan port on Aug. 12.

Chinese demand for corn still strong

Jim Mintert, director of Purdue University’s Center for Commercial Agriculture, noted that Chinese demand for American corn is still strong. By the end of July, China buys had accounted for about 90% of the USDA’s forecasts. About two-thirds of the entire world’s corn ending stocks reside in China. Total corn exports were up 64% from last year, with exports to China making up about three-fourths of that total. Mintert noted that Chinese buyers tend to wait until the end of August for some late buys; this year’s ocean freight rates may cause more hesitation.

Mintert said the slowing economic recovery, due to renewed concerns about the delta variant of COVID-19, has flattened ethanol margins in the U.S.

David Murray can be reached at [email protected].