Containerized soybean exports from US to Asia spike, long-term opportunity seen
US containerized soybean exports to Asia are seeing an earlier-than-usual seasonal surge in demand in August, with Taiwanese buyers leading the pack in purchasing, market sources said.
Typically, the demand season in Asia for US containerized soybean imports starts around September.
“The price is more competitive than bulk,” said a source based in Taiwan, who added that he expects container purchases to continue to rise till the end of the fourth quarter in 2020.
Typically, Taiwan imports around 120,000 mt of soybeans a month, or around two bulk vessels. While the source did not comment on his purchasing volumes in containers, he noted that “containers will be the main focus” for him till the year-end.
“This year, container imports will definitely increase in volumes,” he said.
While the main mode of international transport in soybeans is via bulk carriers, there is a segment of buyers who have been purchasing containerized soybeans in the past few years.
Market sources note that there are no major quality differences between the beans traveling on both modes of transport.
In East Asia, containerized soybean buyers tend to be in Indonesia, Malaysia, Thailand and Taiwan. Taiwanese buyers are particularly flexible and can switch between bulk or containerized soybeans depending on cost efficiencies.
According to market sources, containerized soybeans, which come in lot sizes of around 20-22 mt, tend to be of a lower cost per metric ton. But the sheer difference in lot sizes between containers and bulk shipments, which are typically 60,000 mt of soybeans, has led to major buyers including those in China preferring bulk shipments instead.
S&P Global Platts assessed soybeans on a CFR China basis at $427.05/mt for Panamax cargoes on Aug. 27, an increase of about 4% from the end of July. The price of containerized soybeans to Taiwan is estimated to be about 5% lower, according to market sources.
CONTAINERIZED MARKET SET TO GROW
Over the longer term, US containerized soybean exports to Asia are expected to increase overall, said attendees at the US Soy Global Trade Exchange virtual conference during the week starting Aug. 23.
“We are seeing interest in shipping bulk by container, it’s going up every year,” said Eric Wenberg, Executive Director for the Specialty Soya and Grains Alliance. “There are a couple reasons. In developing markets, we are able to access further inland of the country and the supply chain. There is no need for complicated infrastructure to handle containers. We find customers who want to buy specific quantities, and containers are perfect for that. We expect to see it continue to rise as exports overall rise.”
US Trade Representative Gregg Doud told conference participants on Aug. 27 that while China’s total soybean imports were expected to increase in 2020 by around 20% year on year to nearly 100 million mt, imports from the US in the first six months of the year have dropped by a similar margin of 21% from last year.
This was in spite of China’s pledge as part of the Phase 1 trade agreement signed in January to purchase $80 billion in US agricultural exports over the next two years.
But some of this lag was attributed to the relative weakness of top exporter Brazil’s currency against the US dollar earlier this year. “Our currency is really strong and that pinches us,” Doud said. He also noted that Chinese purchases of US soybeans have increased sharply in August as the Brazilian real recovered in value.
According to market participants, demand from Southeast Asia is also on the rise. This has been a region of steady economic growth where US soybean exporters are looking at new markets to grow their sales, especially while the US-China trade relationship remains tense.
“It’s the food companies in Thailand, soy milk majors in Vietnam, tofu majors. As their economies continue to expand and grow, consumers there continue to demand higher-end products,” said Adam Buckentine, a director at The Redwood Group.
As the export market develops, some growing pains have been seen with occasional shortages of equipment and containers. The majority of containers shipped back to Asia from the major Pacific Coast ports at Los Angeles and Long Beach are empty due to the logistical difficulties in getting them to the soybean producers in the Upper Midwest that need them to export their harvest.
“We have been lucky. We have been able to have access to container supply although it has been limited from time to time,” said Stephen Herr, Vice President of Bean Marketing, Dry Edible, Food Grade Soys and Organics at Star Of The West Milling Co, a panelist at the conference.