The Dry Bulk Weekly Review in Shipfix Data
Sugar and rice prices have had a volatile year amid significant pressures on global supplies from time to time and robust demand. Shipfix’s forward-looking cargo order data indicate that prices for the former will not return to the highs of last year, while the recent decline for rice may prove short-lived. At the same time as Brazilian sugar exports support global supplies, tonnage demand from the South American agricultural trade is approaching the tail end of seasonal weakness.
Cargo Order Volumes for Brazilian Sugar Exports Indicate Better Supplied Markets
After rebounding during the year's first quarter, sugar prices have faced renewed pressure during the past two months. The July #11 sugar futures listed on the ICE have shed around eighteen per cent since the beginning of April. Current prices are also more than 25 per cent below the levels seen in November last year. An improving global supply situation has contributed to the recent retreat amid reports of Brazilian sugar production rising by 84 per cent year-on-year during the second half of April. The rising Brazilian output has come at the expense of falling ethanol production in the country.
A surge in weekly cargo order volumes during February and March eased pressure on global supplies and, given the data set’s forward-looking qualities, contributed to prices beginning to decline in April as shipments reached their destinations. A brief dip in demand for seaborne transportation of the sweetener around the Easter holidays contributed to sugar prices stabilising during late April and early May. However, a solid rebound in demand for seaborne transportation of sugar from Brazil has put renewed pressure on prices.
Continued robust cargo order volumes during the past few weeks and a strong start to the current week indicate that sugar prices will continue to retreat. Weekly cargo order volumes also remain well above the levels seen a year ago, suggesting that a repeat of last year’s price spike is looking increasingly unlikely.
Softer Demand for Seaborne Transportation Could Spell the End for Lower Rice Prices
Rice prices have been trending higher over the past year. The July rough rice futures listed on the CBOT are currently trading nearly fifteen per cent higher than a year ago. Still, the past year has been anything but plain sailing amid extensive price volatility. Since the beginning of February, the contracts have experienced considerable shifts in fortunes, with the past month no exception amid a decline of around eight per cent. Rising global demand in the face of increasingly challenging growing conditions in many key regions has contributed to the elevated and volatile price levels.
Rice prices gained ground during the second half of last year as shipments from India dwindled amid export restrictions. However, a surge in demand for seaborne transportation of rice from Pakistan during the fourth quarter provided an offset, leading to prices coming under pressure during February and March as shipments reached their destinations. However, a weak start to the year for cargo ordering activities saw rice prices rebounding sharply in April.
In recent months, we have seen volatile weekly cargo order volumes for rice. While India has reappeared among the world’s leading exporters, volumes are considerably lower than in past years. The past two weeks have seen relatively robust ordering activities for rice loading globally. Still, despite this, the aggregate for the whole of May is around five million tonnes, somewhat below the average for the past eight months. In addition, the monthly global aggregate demand has been trending lower since March, suggesting that the recent downward pressure on prices may prove short-lived.
Seasonal Weakness for Agris Loading on ECSA May Come to an End
As highlighted above, Brazil is becoming an increasingly important sugar exporter. In addition, even if nowhere near as significant, the global rice market also benefits from supply contributions from South America. Still, even if the Brazilian sugar trade is showing considerable strength, aggregate cargo order volumes for agricultural commodities loading on South America’s east coast are experiencing a period of seasonal weakness as the grains and oilseeds trade takes a breather.
While weekly cargo order volumes are showing signs of a recovery amid an upward trend, recent total volumes remain well below the levels recorded during the early parts of the year. As a result, demand in the mid and small-sized segments has suffered. Compared to average weekly volumes during the first quarter of the year, demand in the panamax segment has been especially hard hit, with a decline of around 40 per cent during the past fortnight. The supramaxes have seen a demand reduction in the trade by approximately a fifth, while the handysizes have fared somewhat better with a decline of around fifteen per cent. The development has contributed to the poor performance of the Baltic Exchange’s indices for the mid-sized segments over the past week.
The suggestion of an upward trend in demand for seaborne transportation of agricultural commodities from the east coast of South America reflects standard seasonal patterns. Should past years’ patterns repeat, weekly cargo order volumes should increase during the coming two months, supporting freight rates in the mid and small-sized segments
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