China slows soybean purchase of October

Chinese traders slowed their purchases of soybeans with shipments in October, amid hopes that Beijing and Washington could reach a trade deal during talks between the US and China in September.

China bought about 4m tons of soybeans for shipment in October, from the 6.6m tons contracted for the month, according to sources, leaving 40% of the month’s purchases uncovered. Chinese buyers are still on schedule for October purchases and can wait to see market movements related to upcoming trade negotiations.

Another factor affecting the demand for Chinese soybeans is the decrease in crushing margin.

One trader said that in China “the domestic crush margin is currently very low and, predicting a likely positive outcome of September trade talks, the market is just waiting for clearer directions” for October purchases.

Brazilian prices have risen more than 12% since April. These rising soybean prices in Brazil is a major concern for Chinese traders because Brazil meets 75% of Chinese soybean demand, sources say.

China used to be the largest market for US soy farmers, buying about 55% (30m tons) of their produce annually, according to data from the USDA.

Since July last year, US-China trade tensions have increased, with both sides charging various retaliatory tariffs. Despite several rounds of negotiations since December, no agreement could be reached. As a result, total US soybean exports fell to 45.7m tons in 2018-19 (July-June), down 19% from a year earlier, while sales to China plunged 75%, notes USDA data.

US-China trade relations hit a new low this month, when both sides announced another round of retaliatory tariffs. While the Trump administration accuses China of not buying enough US farm products, as promised, Beijing accuses the US of bullying during the talks.

While US soybean producers face falling soybean sales and prices, the Chinese market may face supply-side constraints in the fourth quarter as South American soybean stocks run out, according to a commercial source.

Source: Platts

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