Note that over the past few months, grain and soybean prices have risen higher on the back of supply issues, lower-than-expected plantations, uncertainties in Ukraine, and higher export demand. Consequently, the USDA (United States Department of Agriculture) has been increasing its global grain and soybean estimates for marketing year 2013-2014. But if agriculture exports are rising, why are rates for Panamax vessels slumping?
Weakness in coal
While dry bulk capacity growth might have picked up, perhaps a major factor that has contributed to weakness in shipping rates and the Baltic Dry Index relates to weakness in coal demand, driven by efforts to alleviate pollution issues, weakness in industrial and electricity production, increased hydropower production, and a warmer winter in China.
Cyclone Ita
Although the category 5 Tropical Cyclone Ita just passed by Australia's eastern border-where a significant share of seaborne thermal coal and coking coal are produced and exported from Newcastle and Queensland-coal prices have barely changed over the last few days. Theoretically, lower supply should have a positive impact on coal prices. But thermal coal prices, as shown above, remain fragile.
Seaborne coal is cheaper
Even though seaborne prices remain cheaper than domestic coal in China, which should be positive for the Guggenheim Shipping ETF (SEA) and dry bulk shippers such as Diana Shipping Inc. (DSX), Safe Bulkers Inc. (SB), Navios Maritime Holdings Inc. (NM), and Navios Maritime Partners LP (NMM), coal shipments have likely been weak since the start of this year.