Stretched US logistics now face soybean pressure, as exports heat up

Already strained logistics routes for the main US export hubs face additional pressure as China looks to cover supply and as failing harvests in South America bolster demand for US soybeans, market sources told Agricensus.

The US is already the cheapest supply for corn globally, and has seen exports surge on a mixture of relatively low corn prices augmented by a competitive US dollar on international currency markets.

With fears surrounding the health and size of soybean crops in Argentina and Brazil, the pendulum has swung back towards the US for exports as it sits on a substantial soy harvest.

“China is assumed to be only 50% covered on April [soybean] imports. If they have to buy a significant portion from the US, the market could go bonkers,” Paul Sylvester, a broker with McDonaldPelz told Agricensus.

Just in the last 48 hours, US soybean exporters have reported private export sales of just under half a million mt, with at least 120,000 mt of that volume destined for China and the balance currently attributed to unknown destinations.

Riding the freight strain

That comes on the back of a string of strong corn export moves, which have consistently surpassed analysts’ expectations as the US has priced competitively, but bad weather across key logistic routes have brought delays to rail and river movements – the key arteries down which US grains and soybeans are moved in bulk.

“I think, when you try to push that much volume through the system, it will be an issue,” Advanced Trading’s Kelly Herrick told Agricensus.

“No matter how well they move, it’s still like a two lane highway and it gets congested,” he said.

But those movements have been complicated by bad weather with snow and ice across Montana doubling the time taken for trains to transit en route to the Pacific Northwest, while melting ice and heavy rain has swollen key rivers.

The Chicago Mercantile Exchange recently issued two force majeures, one each for corn and wheat loading stations on the Illinois and Ohio rivers, as “such shipping stations are unable to load due to high water levels and/or flooding,” according to the declaration.

Both the Illinois and the Ohio rivers flow into the Mississippi and are key locations for loading corn, wheat and soybeans for shipment to the US Gulf.

Prices firm on demand

In both cases, the combination of demand and obstructed supply have firmed physical premiums over the underlying futures contract, with indications for the US Gulf corn market with late April FOB loadings heard at 85 cents over the May contract.

That compares with premiums of around 55 cents/bu heard in mid-January, while the Pacific Northwest has also seen premiums firm to around 94 cents/bu over May Thursday.