US soybean cargoes rumoured switched to Brazil amid Mississippi woes

28 Oct 2022 | Eduardo Tinti

Chinese buyers were heard to have switched a number of optional origin soybean cargoes from the US to Brazil this week due to uncertainties around transportation disruptions in the Mississippi river that may limit soybean availability at Gulf ports, Brazilian sources have told Agricensus Friday.

Optional origin cargoes are deals in which the buyer can swich origins without paying a penalty fee as happens when buyers cancel purchases to substitute them for volumes from other origins – a process colloquially known as a “washout”.

There was no confirmation as for how many cargoes have been switched out of the US, but loading months were said to range from October to February.

Despite the wide range of delivery months, the optional origin cargoes that have been shifted to Brazil are thought to be for nearby deliveries considering the Mississippi issues in the US and spot soybean demand in China.

Earlier this week Agricensus heard there is a lack of offers for nearby soybean deliveries at US Gulf ports as farmers and traders do not feel confident they will be able to deliver agreed volumes as barge freight down the Mississippi river continue to face severe headwinds on low water levels.

The period from September to early-January is typically the main export window for US soybeans as the North American country’s oilseed crop is harvested in September through October and is typically more competitive during these months than its main competitors in South America.

“Some are reporting that China is attempting to buy cargoes from both Brazil and Argentina which is unusual for this time of year,” Larry Shonkwiler of Advance Trading told Agricensus.

Agricensus heard Chinese buyers had snapped up one Brazilian soybean cargo for November/December loading on Thursday while the bulk of Chinese buying interest seems to have turned towards South America’s new crop due to be harvested from late-January onwards.

Agricensus heard between nine and 13 new crop Brazilian and Argentine cargoes have been booked this week alone.

A China-based analyst has told Agricensus that the country may even shrink down its December and January soybean demand as domestic crushers prefer to wait for Brazil’s new crop rather than securing nearby US volumes.

The rumours heard on Friday of soybean cargoes being switched to Brazil could not be confirmed by US-based sources at the time of press, but most agreed that it both made sense and fitted a recent pattern.

“A good amount [of soybean] sales have been switching Gulf to Pacific Northwest, but [we are] hearing nothing being switched near-term to Brazil,” Shonkwiler said.

Any optional origin switches to Brazil could represent another blow to US soybean exporters during their main export window this marketing year.

The US has faced fierce competition from Argentine soybeans in September when the South American country had a preferential export exchange rate policy in place – referred to as the “soy dollar” – and is now struggling with low Mississippi water levels.

Analysts and traders expect the Mississippi will take another month or two to fully recover.

Considering all these headwinds, a downgrade to US’s 2022/23 exports as estimated by the US Department of Agriculture (USDA) cannot be ruled out.