China Steps Up Soybean Buying From US, Brazil as Prices Fall

China, the world’s biggest link in the soybean buying chain, is stepping up imports to meet rising demand ahead of a seasonally strong period for consumption.

Chinese firms have booked at least 40 cargoes from the US, Brazil, and Argentina in the past two weeks alone, according to people familiar with the transactions. The purchases are to take advantage of improved processing margins, and to rebuild stockpiles ahead of Chinese festivals that run from the autumn through to the Lunar New Year, said the people, who asked not to be identified as they’re not authorized to speak publicly.

Most of the cargoes are for loading in September and October, although some have been booked for next year, they said. Soybeans are used to make vegetable oil and are an important source of protein in animal feed.

Chinese purchases slowed in the first half of the year amid negative margins for crushing beans into meal and oil, cutting inventories before a busy season for demand. That reduced forward coverage and forced companies to seek more supply, according to Victor Martins, senior risk manager at HedgePoint Global Markets in Brazil.

Chinese firms “are now increasing their long position, in order to lock in better forward crushing margins,” Martins said. The purchases are also “a clear signal that China is hedging against a weather issue in Brazil.”

North American soybeans are currently the world’s cheapest and will remain so until mid-January when the Brazilian harvest picks up. But there is a risk that a third consecutive La Nina weather event strikes and the crop there once again disappoint like last year.

The US Department of Agriculture, on Wednesday, August 31, announced export sales activity of 167,000 metric tons of soybeans to China, bringing the total sales for the week to 431,000 tons.

Overnight, China bought two more US Gulf soybeans cargoes for delivery in October and November and another two Pacific Northwest port cargoes for October and December, according to Martins.

Source: BNN Bloomberg

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