Commodities
Analysis-Brazil clears bottlenecks to oust US as top corn exporter
© Reuters. A combine harvester is seen as it harvests corns at a farm near Brasilia, Brazil August 22, 2023. REUTERS/Adriano Machado
2/5
By Ana Mano
SAO PAULO (Reuters) – Brazil is set to overtake the U.S. this year as the world’s top corn exporter, reflecting both a bumper harvest and logistical breakthroughs such as the consolidation of northern export routes, which are boosting the competitiveness of the South American grains powerhouse.
Corn exports through Brazil’s northern ports, which use the waterways of the Amazon (NASDAQ:) River basin to ship grains globally, are on track to beat volumes via the most traditional port of Santos for a third consecutive year, according to a Reuters analysis of grain shipping data.
The shift underscores how Brazil, which churns out three corn crops per year and still has huge expanses of under-used farm land, is finally overcoming some of the infrastructure bottlenecks that have long made it hard to get its bountiful harvests to global markets.
That and a new supply deal with China announced last year suggest Brazil may be opening a longer era of supremacy over U.S. corn exports, unlike the last time the Brazilians briefly grabbed the global corn crown during North America’s drought-hit 2012/13 season.
The improved export capacity helped Brazil to fill gaps in the global corn market amid disruptions from the war in major grain exporter Ukraine and trade tensions between the U.S. and China.
“We celebrated a lot… when (corn export) volumes via northern ports equaled Santos,” said Sergio Mendes, head of Brazilian grain exporter group Anec. “By using northern ports… you are saving 20 reais ($4.12) per ton (of corn).”
Major new investments in Brazil have begun to ease several chokepoints and bring down logistics costs sharply, helping to undercut U.S. farmers.
Northern export routes in particular have benefited from a 2013 law that encouraged grains traders such as Cargill and Bunge (NYSE:), and barge operator Hidrovias do Brasil, to build out new private-use port terminals (TUPs).
Their transshipment stations on the Tapajos and Madeira rivers have linked up the heart of Brazilian farm country and up-and-coming Amazonian ports such as Itacoatiara, Santarem and Barcarena.
The Tegram grain terminal at Itaqui, built and operated by foreign and Brazilian grain merchants including Louis Dreyfus Commodities and Amaggi, boosted its grain export volumes by 306% in eight years to more than 13 million tons in 2022, according to data provided by the firms.
The TUP legal framework, unlike a traditional concession for a limited period, has unlocked a wave of long-term port investments in Brazil. Some 39 billion reais ($8.0 billion) have poured into building and expanding 112 new private-use terminals under the new law, according to a 2020 study by Brazil’s TCU federal audit court.
Brazil’s farm industry, however, is not past all of its logistical woes. On-farm storage capacity still pales next to rival grain powers like Canada, the U.S. and Argentina.
In the No. 1 grains state of Mato Grosso, the storage gap had surged to 46 million metric tons, according to state government data through 2021, after the annual corn harvest tripled in a decade to over 90 million tons, faster than new silos could be built.
A lack of storage space means Brazilian farmers are forced to quickly sell their harvests or pile their corn outside warehouses and hope for good weather. As a result, much of the Brazil harvest crowds onto the roads during a narrow seasonal window, which can make for expensive traffic jams.
CHEAPER ROUTE TO CHINA
The new export capacity has helped grains shipped from Brazil’s northern ports to compete on logistics costs with U.S. farmers.
Shipping a ton of soybeans in 2008 from Iowa to Shanghai was 77% of the price of using Brazil’s northern ports, but by March 2023 it was 5% more expensive shipping it from the U.S., according to U.S. Department of Agriculture and Brazil’s ESALQ-LOG data. For corn, freight values are very similar, says Thiago Pera, logistics research coordinator at ESALQ-LOG.
The Amazon basin has also become competitive with the southeastern port of Santos, long the powerhouse of Brazilian grains exports. Some 37% of Brazil’s total corn exports flowed through Barcarena, Itaqui, Itacoatiara and Santarem ports in the first half of 2023, according to Brazil’s crop agency Conab. Just 24% flowed through Santos.
By comparison, Santos exported almost three times more corn than those four northern ports in 2015, before heavy investments expanded port capacity in the Amazon region.
“The greater share of shipments through northern ports reflects cheaper freight costs compared to routes to the ports in the south and southeast,” said Thome Guth, a Conab official.
Conab forecasts Brazil’s 2023 total corn output at nearly 130 million metric tons, the highest ever, and exports reaching 50 million metric tons for the first time.
Corn futures in Chicago have fallen from a 10-year high in April 2022 to a two-and-a-half-year low this month, in part due to ample supplies from Brazil.
Brazil’s surging export infrastructure shows little sign of letting up, even though lower prices may discourage farmers from expanding plantings as rapidly.
Chinese state-owned trader COFCO is now building a major new grains terminal at Santos after getting a 25-year license to operate a unit with capacity for 14 million tons. Shipments from COFCO’s STS11 terminal are scheduled to begin in 2026.
A highway license issued two years ago has also modernized a key Amazonian grain corridor stretching over 1,000 kilometers (625 miles) from Mato Grosso to ports in Para state, known as BR-163.
For years, caravans of grain trucks would get stuck regularly in deep mud on that road when they got caught in the rain on their way to northern ports.
Major rail projects still face an array of bureaucratic obstacles, but a few have gotten off the drawing board.
Brazil’s largest rail company Rumo just finished an investment of 4 billion reais on the Ferrovia Norte Sul, started in 2019. The line connects Santos port to farm states Tocantins, Goias, Minas Gerais and Mato Grosso, reinforcing another key route to get Brazilian harvests to global markets.
($1 = 4.8769 reais)
(Reuters) – Gold hit a record high above $2,600 per ounce on Friday, as the prospect of more U.S. interest rate cuts and global geo-political uncertainty boosted its appeal.
Bullion has risen more than 26% so far this year, and as market bulls lock in further gains, another milestone of $3,000 per ounce is in focus.
Here are the different avenues for investing in gold:
SPOT MARKET
Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics.
London is the most influential hub for the market, largely because of the London Bullion Market Association (LBMA). The LBMA sets standards for gold trading and provides a framework for the OTC (over-the-counter) market, facilitating trades among banks, dealers, and institutions.
China, India, the Middle East and the United States are other major gold trading centres.
FUTURES MARKET
Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in future.
COMEX (Commodity Exchange Inc), a part of the New York Mercantile Exchange (NYMEX), is the largest market in terms of trading volumes.
Shanghai Futures Exchange, China’s leading commodities exchange, also offers gold futures contracts. The Tokyo Commodity exchange, popularly known as TOCOM, is another big player in the Asian gold market.
EXCHANGE TRADED PRODUCTS
Exchange Traded Products (ETPs) or Exchange Traded Funds (ETFs) issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself. [GOL/ETF]
ETFs have become a major category of investment demand for the precious metal.
Global physically backed gold ETFs attracted a fourth consecutive month of inflows in August after North American and Europe-listed funds increased holdings, the World Gold Council (WGC) said.
BARS AND COINS
Retail consumers can buy gold from metals traders selling bars and coins in an outlet or online. Both gold bars and coins are effective means of investing in physical gold.
DRIVERS:
INVESTORS AND MARKET SENTIMENT
Rising interest from investment funds in recent years has been a major factor behind bullion’s price moves.
Sentiment driven by market trends, news, and global events can also lead to speculative buying or selling of gold.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the U.S. dollar as weakness in the U.S. unit makes dollar-priced gold cheaper for holders of other currencies and vice versa.
MONETARY POLICIES AND POLITICAL TENSIONS
The precious metal is widely considered a “safe haven”, bought during uncertain times in a flight to quality.
Major geopolitical events, such as extended conflicts in the Middle East and Europe have added to uncertainties for global investors and burnished gold’s appeal.
Policy decisions from global central banks also influence gold’s trajectory. Lower rates reduce the opportunity cost of holding gold, since it pays no interest.
Gold’s latest rally was triggered after the U.S. Federal Reserve began its easing cycle with an outsized half-percentage-point cut on Wednesday.
CENTRAL BANK GOLD RESERVES
Central banks hold gold as part of their reserves. Buying or selling of the metal by the banks can influence prices.
Central bank demand has been robust in recent years because of ongoing macroeconomic and political uncertainty, analysts have said.
More central banks plan to add to their gold reserves within a year despite high prices for the precious metal, the World Gold Council (WGC) said in its annual survey in June.
Investing.com– Oil prices retreated Friday, but were still headed for a weekly gain as a bumper U.S. interest rate cut helped quell some fears of slowing demand.
At 08:20 ET (12:20 GMT), fell 0.6% to $74.47 a barrel, while dropped 0.5% to $70.79 a barrel.
Oil heads for weekly gains on rate cut cheer
Crude prices have staged a strong recovery from near three-year lows hit earlier in September, with a bulk of their rebound coming this week as the dollar retreated on a by the Federal Reserve.
was trading up about 3.95% this week, while WTI futures were up 4.4%.
Increased tensions in the Middle East also aided crude, after Israel allegedly exploded pagers and walkie talkies belonging to Hezbollah members, sparking vows of retaliation. Fighting in and around Gaza also continued.
A softer aided crude prices after the Fed cut interest rates by the top end of market expectations and announced an easing cycle, which traders bet will help spur economic growth in the coming quarters.
Lower rates usually bode well for economic activity, which in turn is expected to buoy crude demand.
China demand concerns persist
But China remained a key point of contention for crude markets, as economic readings from the world’s biggest oil importer showed little signs of improvement.
The People’s Bank of China kept unchanged on Friday, despite mounting calls on Beijing to unlock more stimulus for the economy.
Data released earlier in September showed Chinese refinery output slowed for a fifth straight month in August, while the country’s oil imports also remained mostly weak.
Concerns over China dragged oil prices to a near three-year low earlier this month, and have limited any major recovery in crude.
“China has obviously been the key concern when it comes to demand, but there have also been reports of refiners in Europe cutting run rates due to poor margins,” said analysts at ING, in a note.
(Ambar Warrick contributed to this article.)
By Arunima Kumar
(Reuters) -Oil prices eased on Friday, but were on track to register gains for a second straight week following a large cut in U.S. interest rates and declining global stockpiles.
Brent futures were down 50 cents, or 0.67%, at $74.38 a barrel at 1004 GMT while U.S. WTI crude futures fell 48 cents, or 0.65%, at $71.47.
Still, both benchmarks were up 3.7% and 4% respectively on the week.
Prices have been recovering after Brent fell below $69 for the first time in nearly three years on Sept. 10.
“U.S. interest cuts have supported risk sentiment, weakened the dollar and supported crude this week,” UBS analyst Giovanni Staunovo said.
“However, it takes time until rate cuts support economic activity and oil demand growth,” he added, regarding crude’s more muted performance so far on Friday.
Prices rose more than 1% on Thursday following the U.S. central bank’s decision to cut interest rates by half a percentage point on Wednesday.
Interest rate cuts typically boost economic activity and energy demand, but some also see it as a sign of a weak U.S. labour market.
The Fed also projected a further half-point rate cut by year-end, a full point next year and a half-point trim in 2026.
“Easing monetary policy helped reinforce expectations that the U.S. economy will avoid a downturn,” ANZ Research analysts said.
Also supporting prices were a decline in inventories, which fell to a one-year low last week. [EIA/S]
A counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) will support prices in the $70 to $75 a barrel range during the next quarter, Citi analysts said on Thursday, but added prices could plunge in 2025.
Crude prices were also being supported by rising tensions in the Middle East. Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.
Security sources have said the Israeli spy agency Mossad was responsible, but Israeli officials have not commented on the attacks.
China’s slowing economy also weighed on market sentiment, with refinery output in China slowing for a fifth month in August and industrial output growth hitting a five-month low.
Forex2 years agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Forex2 years ago
Unbiased review of Pocket Option broker
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China
- Stock Markets2 years ago
Morgan Stanley: bear market rally to continue
