China increases soybean imports from Brazil

China is avoiding the purchase of American soy and intensifying the purchase of soybean from Brazil

According to Bloomberg, Chinese private and state-owned companies bought between 1.5m and m tons from Brazil this week, up until Thursday.

The orders were placed after China stopped buying American soybeans because of trade tensions between the country and the United States, and because of Argentine farmers then withholding the grain as a form of protection against the currency depreciation that the country is facing because of the uncertainty of the elections.

As Brazil’s premiums soar, therefore, soybean futures in Chicago are heading for a weekly loss even after the US government said the plantations are smaller than expected.

Chinese buyers are buying the Brazilian commodity as they have not yet bought enough to cover their needs by October.

Although Brazil has been able to meet China’s demands so far, inventories are dwindling and Beijing risks not being able to meet its needs.

Brazilian soybean stocks are expected to fall to 2.6m tons at the end of the season, the lowest in 20 years, according to Abiove. This is also below a July forecast of 5.6m tons.

Chinese purchases of Brazilian soybeans last year increased after Beijing applied 25% retaliatory tariffs on US exports. While African swine fever this year is hurting demand for soybean meal as swine herds shrink, China is still at risk of supply shortages in the fourth quarter.

The following DataLiner chart shows soybean exports from Brazil to China from January 2015 to June 2019:

Source: Bloomberg

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