Brazilian Soybean Shipping Season Finally Getting Underway

March 15, 2013 12:55 AM

What Traders are Talking About:

* Brazil beans move to discount. Reuters reports the price paid for soybeans at Brazil's Port of Paranagua moved to a discount to Chicago Board of Trade soybean prices for the first time Thursday. While Brazil is facing a logistics nightmare trying to get a record soybean crop to port and onto ships, active loading of ships is finally underway. The problem, according to one source, there are 4.6 MMT of soybeans and corn at the Port of Paranagua waiting to be loaded and loading capacity at the port is only 65,000 MT per day. At that rate, it would take 70 days to clean out the inventory -- and more new-crop supplies are on the way.

The long and short of it: Anticipation that the Brazilian shipping season is moving into full gear has weighed heavily on old-crop soybean futures this week. But loading constraints (and any possible labor disputes) could cause end-users with immediate need for soybeans coming to the U.S. to fill their needs.

* Speaking of labor disputes. After a series of mini-strikes last month, Brazilian port workers agreed to not strike until March 15 -- today -- as union leaders negotiated with the Brazilian government over the plan to privatize ports. With that deadline now passed and union leaders not satisfied with progress of the talks, a 24-hour work stoppage will take place at 36 ports next Tuesday, March 19. And union leaders have threatened additional work stoppages if their concerns over the potential for lost jobs and lower wages aren't addressed.

The long and short of it: Temporary work stoppages are somewhat expected in Brazil ahead of the main shipping season. But if this turns into anything more than a brief stoppage, it would become a market factor as that would push more near-term export business to the United States.

* China cotton import quotas coming next month. Trade sources tell Reuters China is likely to issue around 800,000 MT in additional cotton import quotas in April, after the government's stockpiling program is completed at the end of this month. The sources expect about 75% of the additional quotas to be granted to firms that export their products, clearly a sign the Chinese government sees exports as key to its economic recovery. Chinese mills are struggling to find supplies as the government has purchased 93% of last year's domestic crop for state reserves to date.

The long and short of it: As I've previously stated, demand will signal when the rally is coming to an end in the cotton market. For now, there appears to be more demand on the horizon despite the sharp rally in cotton futures.


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