China’s total imports of U.S. soybeans for the marketing year that started on Sept. 1 may drop by at least 20% to less than 30 million tonnes, according to analysts and top importers.
U.S. farmers have just gathered their second largest soybean crop in history, and typically export around 45-50% of annual output.
More than half of those sales tend to go to China, which in turn makes around 70% of its U.S. soybean deals during the post-harvest window from September through December.
But this year the aftermath of Hurricane Ida – which hobbled crop-loading at key U.S. ports for several days in September – resulted in an 81% drop in China-bound shipments that month from the year before, according to U.S. Department of Agriculture data.
Further, the main drivers of China’s soy demand – crushing and hog production margins – hit a soft patch right during the peak U.S. harvest window, blunting China’s appetite for U.S. supplies.
U.S. loadings picked up sharply in October to over 10 million tonnes, according to Refinitiv data, but now face the prospect of an earlier-than-usual start to the 2022 export season out of Brazil, the world largest soy producer.
“The U.S. (soybean) export season had a bad start this year. Crush margins were low and demand was not good at that time,” said Bai Jie, analyst with COFCO futures.
“Then there was the impact from Hurricane Ida. And some U.S. market share was squeezed by Brazilian beans,” Bai said.
U.S. soybean shipments to China in 2020-21 were the strongest since the 2016-17 season, thanks in part to a delayed start to the 2021 Brazil export season that helped extend U.S. sales.
“American beans won’t have such opportunity in the coming months, as planting of Brazilian beans is fast this year, meaning there will be ample beans to be shipped to China in the first quarter of 2022,” said Zou Honglin, analyst with the agriculture division of Mysteel, a China-based commodities consultancy.
U.S. soybeans have also faced price headwinds, with export offers trading fairly close to those out of Brazil, where freight costs to China are lower.
In addition, Brazilian soybeans offer better crush margins for Chinese soy processors, thanks to higher average protein levels in Brazilian soybeans. Margins for U.S. soybeans shipped out of the Pacific Northwest for February delivery are at about 500 yuan ($78.49) per tonne, compared with 684 yuan for Brazilian beans, according to Mysteel.
“Brazilian beans are just cheaper, and price is king,” said an Asia-based trader with a top trading house.
“WINDOW IS CLOSING”
Chinese soybean importers have nearly completed December purchases, and are now filling January and February needs just as the Brazilian export season ramps up, according to a U.S. exporter.
January soybean shipments from the Gulf Coast were offered around $500 per tonne FOB late last month, with an additional $78 or $80 per tonne for freight to China. Brazilian soybeans are around $520 per tonne FOB, with freight of around $60 per tonne, he said.
“It’s been a little disappointing from a U.S. perspective. Brazil’s been wedging into our export window a little more every year,” the exporter said. “Our window is closing.”
China’s soybean arrivals in November-December will mainly be U.S. cargoes, but Brazilian shipments are expected to rise sharply during January-March to over 6 million tonnes, according to Mysteel’s Zou.
That would mark a more than four-fold rise from the 1.35 million tonnes during the first quarter of 2021.
With China expected to account for nearly 60% of all soybean imports this season, U.S. exporters will not be able to find a single large buyer to replace it. Europe, Mexico, Argentina, Egypt and Thailand are the next five largest importers, according to the USDA, but collectively buy only a third of China’s total.
Hog production margins will be a key determinant of final soy demand in China next year. A surge in its pork output in 2021 caused margins to collapse to record lows, slashing the sector’s appetite for soymeal feed. But a recovery in pork prices and hog margins is now underway, and if sustained will lift total soy consumption.
However, with Brazilian beans boasting higher protein content anyway, South American exporters stand to benefit most from any further climbs in demand.
“Pressure for American beans would only grow going forward, as long as weather in South America remains normal,” said a soymeal trader in Shandong province, a major livestock producer in China.
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