LONDON - The congestion at Brazilian grain terminals is worsening and U.S. soybean suppliers may have reason to celebrate. U.S. soybean sales to date in the new marketing year have been rather sluggish, lagging the previous two years by 20 percent. At the same time, vessels are backing up at Brazilian ports amidst the height of their corn export season. Average wait times outside Paranagua, which ships up to 20 percent of Brazil’s exportable soybeans, reached 43 days last month (http://tmsnrt.rs/1MHznuU). Elsewhere in Brazil, queues have also been mounting. Of the 10 largest Brazilian grain ports by volume, ships waited on average twice as long to load and sail during October 2015 than they did in October 2014. Brazilian shippers have potentially become overly optimistic given the abundant supply, competitive prices, and the weak real. Although overall exported volume to date is considerably up on the year, more ships plus more grain plus more rain means lower efficiency than last year, and the backup is expected to get worse. Local corn prices coupled with global exportable corn surplus suggests that Brazilian corn is still an economical purchase for buyers and worth the wait so long as all associated factors remain relatively stable into the new year. But Brazilian soybean suppliers may have drawn the short straw when it comes to the port traffic jam. Delivery costs to China between Brazilian and U.S. soybeans have been quite competitive, and it’s likely that corn will still be at ports waiting to load come February when Brazilian exporters expect to ramp up soybean shipments. This could mean that China will soon begin sending more vessels to the United States to pick up soybeans instead of taking their chances in long queues south of the Equator, particularly if the Brazil cost-benefit diminishes. HOW MUCH WORSE CAN DELAYS GET? Backups at Brazilian ports are not uncommon, but the rain particularly exacerbates delays. Operations are halted in wet conditions because the grain loaders are uncovered. Over the last two months, rain has been frequent and plentiful in southern Brazil, the exit point for the vast majority of Brazil’s corn and soybean shipments. Dryness does not seem to be on the cards over the next two weeks either (http://tmsnrt.rs/1LRccuy). There is also a bleak outlook for the next three months as El Niño is known to bring wet weather to southern Brazil, delighting the soybean farmers but leaving those further down the supply chain grumbling at the port closures and resulting delays. Based on the most recent shipment schedule for November, ships outside Paranagua will have to wait nearly 50 days to sail with their cargoes this month, and this figure is before factoring in any potential shut downs that could be forced by the rain. Congestion at other Brazilian ports is not expected to ease noticeably this month. Three new, quicker ship loaders and recent regulations to control truck traffic at Paranagua may prevent a repeat of the severe backup in late 2013, with delays of nearly 100 days. But this increase in efficiency may not be enough to offset the longer wait times with such a packed lineup, especially if rains turn out to be greater than expected. BRAZILIAN CORN SAFE, FOR NOW Brazilian corn is currently cheaper than U.S. corn. Even with an assumed November delay of 50 days at Paranagua on top of the current $22 per ton discount, delivery costs to major Asian buyers still supports purchases from Brazil (http://tmsnrt.rs/1MHDC9D). In order for Asian countries such as Japan or Indonesia to favour U.S. corn in terms of cost to deliver, Paranagua delays would need to approach six months, far outside of anything observed in recent history. Brazilian sellers have extra motivation to get rid of their corn supply and keep the price competitive because the recent weakness in the real leads to higher profits locally. Also working in Brazil’s favour on the corn front is the increased number of exit points for corn over last year, perhaps easing stress on Paranagua and other southern ports. Overall corn shipments since July 1 have risen by 50 percent over the last year, aided by a tenfold increase in volumes on the year out of ports in the northern state of Pará. U.S. SOY SALES MAY SOON PICK UP AT BRAZIL’S EXPENSE But anxiety may build for Brazilian soybean exporters if the congestion considerably worsens or if the soybean price gap between Brazil and the United States closes. Both New Orleans and Paranagua soybean delivery prices to Dalian have been in a steady decline in recent weeks, but the gap is narrowing. The current $7 discount on Paranagua beans means that all other factors being equal, delay times cannot exceed 70 days (http://tmsnrt.rs/1Qfovnq). However, the sensitivity on this estimation is high. If the spread narrows by even $1, the maximum vessel waiting time drops to 60 days. This is bad news for Brazilian bean suppliers because delays are indeed expected to build. Brazilian corn exports typically wind down in January just before bean exports pick up in February, but with delays already pushing longer than usual, corn may still be waiting to load as soy bulkers start arriving at port. From a cost standpoint, current prices imply Brazilian soybeans are still attractive to Chinese buyers, but they shouldn’t expect those beans to arrive en masse anytime soon. Brazil is left to hope that delivery costs do not change unfavourably between now and February and that their beans will still be worth the wait. But the trends are looking increasingly good for U.S. exporters. The increasing traffic jam in Brazil may just be the tipping point that turns the tables, leaving Brazil seeking buyers while the United States rakes in the business.