China’s desire for U.S. soybeans came roaring back last year after the trade war and hog disease significantly curbed imports in the prior couple years, but now the Asian country’s interest in the U.S. oilseed for the upcoming cycle has stalled out after a promising start.

In normal, pre-trade war and pre-African swine fever years, China usually started booking up larger quantities of new-crop U.S. soybeans in July and August, so it is still a bit early for exporters to get nervous. Last year, Chinese buyers started their spree in June, but they may be less eager this year.

Since late January, U.S. soybean sales to China for the 2021-22 year starting Sept. 1 have been at a seven-year high. As of June 10, some 3.05 million tonnes were on the books for China and another 2.8 million were for unknown destinations, which combined for 78% of total sales.

Most of those sales came in January, but Chinese and unknown buyers have been relatively quiet since then, and there are reasons to believe they could stay quiet at least in the near term.

Chinese soybean futures this week have traded near the lowest values of the year and at least 12% off March’s record high. Still, current prices are around 17% stronger than in mid-June 2020. Additionally, Chinese crush margins have been bad over the last month, which is unlikely to entice buyers.

U.S. soybean prices and freight rates are well above a year ago. Also problematic for U.S. exporters is that Brazilian prices are competitive early in the upcoming U.S. shipping season due to Brazil’s delayed planting and harvest, something that is not typically an issue.

The delayed Brazilian cargoes are expected to maintain strong Chinese bean imports in June and July, padding what is already reportedly a healthy supply. The large influx of soybeans combined with falling prices could help improve crush margins.

Beijing cut off market access to domestic supply data at the end of April so exact stocks are unknown, but imports may fill in some of the information gap. Through May, China in 2021 had taken in a record 38.2 million tonnes of soybeans, up 13% on the year.

China’s reported hog herd recovery in theory should support strong feed demand. The agriculture ministry said on Wednesday the pig herd in May was up 23.5% on the year and the sow herd up 19.3%, with the latter reaching 98.4% of the end-2017 levels.

However, live hog prices have plunged 60% so far this year, reaching two-year lows this week, and Beijing has urged pig farmers to maintain reasonable production levels. Analysts believe that poor margins may cause farmers to ignore the government warning to hold on to pigs.

SOY EXPORTS

Data published last week by the U.S. Census Bureau put April U.S. soybean exports at 1.38 million tonnes, the lowest monthly volume since June 2016. But the September-through-April volume of 57.7 million tonnes was easily a record, bolstered by a string of monthly records in the first five months.

This means exporters have less work than normal before 2020-21 wraps on Aug. 31, requiring a little more than 1 million tonnes per month on average in the final four months. The U.S. Department of Agriculture estimates 2020-21 U.S. soybean exports at a record 62.1 million tonnes (2.28 billion bushels).

As of June 10, USDA data showed 690,469 tonnes of purchased, old-crop soybeans left to ship to China by Aug. 31. That number has not materially changed in nearly two months, possibly suggesting it could roll into the next marketing year. The volume is only 18.5% of remaining outstanding sales, far below China’s 58% share of total U.S. bookings this year.

USDA sees U.S. soybean exports in 2021-22 falling 9% on the year, though the agency has China slated to import a record 103 million tonnes, up 3% on the year. That gap is expected to be covered by Brazil, which is seen raising a record crop and increasing exports by 8% to 93 million tonnes.
Source: Reuters (by Karen Braun)