March 18, 2013

Soybean Premiums Turn Negative at Port of Paranagua

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

For the first time since 2008, the price of soybeans at the Port of Paranagua turned negative late last week compared to the Chicago Board of Trade. The drop in price is believed to be a direct result of the systemic logistical problems in Brazil. The negative premium is expected to increase in coming weeks as more soybeans arrive at the ports and shipping delays mount.

The negative premium late last week was US$ 5.51 per ton or US$ 0.33 per sack of 60 kilograms (US$ 0.07 per bushel). Premiums are determined by various factors including: origin and destination of the soybeans, quality, maritime freight, demand, currency exchange rates, and loading rates at the port.

There has been a lot of news recently in Brazil about long lines of trucks at rail terminals and port facilities, but the true bottleneck in Brazilian logistics is the lack of berths to load soybeans and soybean meal at the two main ports in Brazil, Paranagua and Santos.

The public berths at the Port of Paranagua have a loading capacity of 65,000 tons per day and at that rate, it would take 40-50 days to load the vessels already waiting in the harbor. That maximum rate is also dependent on dry weather. All loading operations are suspended during periods of wet weather, which can make the waiting times even longer. The logistical situation at the Port of Paranagua is not expected to improve any time soon and as a result, additional export business is being routed back to the United States where soybean supplies can be secured in a timelier manner.

If these negative premiums persist for the remainder of the export season, farmers in Parana could potentially miss out on R$ 76 million in lost income from the 7 million tons of soybeans expected to be exported from the state.