The Dry Bulk Weekly Review in Shipfix Data
The momentum for further price gains for rice and sugar remains in place amid recent downward pressure on global cargo ordering activities for the two commodities. Shipfix’s forward-looking data set points towards continued low Indian exports of the agricultural commodities, providing further headwinds for demand in the mid and small-sized vessel segments in the Indian Ocean.
Loss of Upward Momentum for Cargo Order Volumes Could Fuel a Continued Price Rally for Rice
After retreating during the final weeks of October, rice prices have bounced back sharply since the beginning of the month. Since early November, the January 2024 futures for rice listed on the CBOT have gained around ten per cent and surged past the levels seen at the beginning of September. Prices have also moved above the previous highs for the year that was set in January.
Rice prices remain elevated amid a tight global supply situation following India’s almost complete withdrawal from the export markets in order to safeguard domestic supplies. As a result, the downward pressures on global supplies and a continued upward trajectory for worldwide demand have created a situation where the shortage of the commodity has been at the highest level for two decades.
Weekly cargo order volumes for rice loading globally have been trending higher over the past few months. Still, while the aggregate volumes for October were the highest monthly reading for the past year, they were nevertheless well below what has been observed over the previous years. The current month looks unlikely to match October’s reading amid a slow start to ordering activities. Should developments during the remainder of the month mirror those of the first half of November, the current month could see cargo order volumes reaching three million tonnes, some 30 per cent less than in October.
As Indian exports have declined, exports from Thailand, Pakistan and Vietnam have made up for some of the shortfall. Still, as order volumes remain volatile and exports insufficient to satisfy global demand, rice prices look set to stay elevated and changeable. Also, the decline in demand for seaborne transportation of rice, compared to October, suggests that the recent price rally is unlikely to run out of steam anytime soon.
Pressure on Cargo Order Voulunes for Sugar may Provide a Leading Indicator for Higher Prices
While the sugar #11 futures for delivery in March have retreated somewhat from the twelve-year high set at the beginning of the month, prices for the sweetener have increased by more than 50 per cent over the past year. An increasingly tight global supply situation, amid earlier adverse growing conditions for some large producers and Indian export restrictions, has contributed to prices rising to the highest levels since 2011.
Global cargo order volumes for sugar have been under pressure since the peak for the year in late August, suggesting that prices will remain high. The elevated cargo ordering activities during August and September contributed to prices easing by around seven per cent during the second half of September. However, the #11 March futures have risen by approximately six per cent over the past month and a half.
With a few exceptions, weekly global cargo order volumes for sugar have stabilised around two million tonnes over the past two months, with Brazilian exports dominating. Hence, there is little to suggest that the past week’s limited decline in sugar prices will be long-lived. Also, last week’s global cargo order volumes fell well short of recent levels amid a 39 per cent decline. Hence, the highs for the futures seen earlier in the month may come under threat in the coming weeks.
Indian Export Restrictions on Ags Weighing on Demand for Seaborne Transportation in the Indian Ocean
Indian export restrictions on rice and sugar have contributed to the past year’s price gains. The initiative by the government in the world’s most populous country is part of more comprehensive efforts to safeguard domestic supplies of agricultural commodities and keep prices stable. Beyond rice and sugar, the clampdown on exports has also affected staples such as wheat.
The selective withdrawal from the export markets by the Indian farmers has seen cargo order volumes for agricultural commodities loading in the Indian Ocean under pressure during the current year. Earlier in the year, the seasonal boost for volumes during the early parts of the second quarter did not materialise, putting pressure on demand for small and mid-sized vessels. While recent weeks have seen a steady recovery in cargo order volumes, the weekly aggregates remain well below what was seen during the early parts of the year. Compared to activities during January and February, demand for smaller vessels has been affected by the lack of demand for seaborne transportation of agricultural commodities in the Indian Ocean. Hence, the weakness is likely to contribute to the smaller vessels continuing to underperform their larger siblings on a global basis.
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