Analysis: China to cut US soybean imports after shipping delays cut export window


BEIJING / CHICAGO, Dec. 3 (Reuters) – Chinese soybean imports from the United States in 2021/22 are expected to drop sharply from last season after loading delays following Hurricane Ida.

A soybean harvest in Brazil in early 2022 also shortened the United States’ export window to China, the world’s largest soybean buyer.

China‘s total imports of U.S. soybeans for the marketing year that began Sept. 1 could drop at least 20 percent to less than 30 million tonnes, analysts and major importers say.

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American farmers have just harvested their second largest soybean crop in history and typically export around 45-50% of their annual production. Read more

More than half of those sales tend to go to China, which in turn achieves around 70% of its soybean sales in the United States during the post-harvest period from September to December.

US soybean exports to China by marketing year

But this year, the aftermath of Hurricane Ida – which hampered the loading of crops at major U.S. ports for several days in September – led to an 81% drop in shipments to China this month compared to the previous year, according to data from the United States Department of Agriculture.

In addition, the main drivers of soybean demand in China – crushing and hog production margins – experienced a period of weakness just during peak harvest time in the United States, dampening China’s appetite for American supplies.

Soybean and pork production margins in China tumbled at the start of the soybean export season to the United States

US shipments rose sharply in October to over 10 million tonnes, according to data from Refinitiv, but now face the prospect of an earlier than usual start of the 2022 export season out of Brazil , the world’s largest soybean producer.

Seasonal soybean exports from the United States

“The United States (soybean) export season got off to a bad start this year. Grinding margins were low and demand was not good at that time,” said Bai Jie, analyst at COFCO Futures. .

“Then there was the impact of Hurricane Ida. And part of the US market was shrunk by Brazilian beans,” Bai said.

INCONVENIENCE

Soybean shipments from the United States to China in 2020-21 were the largest since the 2016-2017 season, in part due to the delayed start of Brazil’s 2021 export season which helped expand sales to United States.

“American beans will not have such an opportunity in the coming months, as Brazilian bean planting is fast this year, which means there will be enough beans to ship to China in the first quarter of 2022” said Zou Honglin, agricultural division analyst at Mysteel, a China-based commodity consultancy.

US soybeans have also faced headwinds on prices, with export offers quite close to those from Brazil, where freight costs to China are lower.

Soybean Price in the United States vs. Brazil and Shipping Costs to China

Additionally, Brazilian soybeans offer better crushing margins for Chinese soybean processors, thanks to higher average protein levels in Brazilian soybeans. Margins for U.S. soybeans shipped from the Pacific Northwest for February delivery are around 500 yuan ($ 78.49) per tonne, compared to 684 yuan for Brazilian beans, according to Mysteel.

“Brazilian beans are just cheaper and the price is king,” said an Asia-based trader with a large trading house.

“THE WINDOW IS CLOSING”

Chinese soybean importers have almost completed their December purchases and are now meeting January and February needs just as Brazil’s export season is accelerating, according to a U.S. exporter.

January soybean shipments from the Gulf Coast were offered around $ 500 per tonne FOB at the end of last month, with an additional $ 78 or $ 80 per tonne for freight to China. Brazilian soybeans cost around $ 520 per tonne FOB, with freight of around $ 60 per tonne, he said.

“It has been a bit disappointing from a US perspective. Brazil has sunk deeper into our export window every year,” said the exporter. “Our window is closing.”

Soybean arrivals from China in November-December will be mostly US shipments, but Brazilian shipments are expected to rise sharply in January-March to exceed 6 million tonnes, according to Mysteel’s Zou.

This would represent a fourfold increase from 1.35 million tonnes in the first quarter of 2021.

With China expected to account for nearly 60% of all soybean imports this season, US exporters will not be able to find a single large buyer to replace it. Europe, Mexico, Argentina, Egypt and Thailand are the next five biggest importers, according to the USDA, but collectively buy only a third of the Chinese total.

POWER OF PROTEIN

Pork production margins will be a key determinant of final soybean demand in China next year.

An increase in its pork production in 2021 sent margins collapsing to record levels, reducing the industry’s appetite for soy foods. Read more

But a recovery in pork prices and margins is now underway and, if sustained, will increase total soy consumption.

Pork prices in China relative to pork production margins

However, with Brazilian beans showing a higher protein content anyway, South American exporters will benefit the most from any further increase in demand.

“The pressure for US beans will only increase, as long as the weather in South America remains normal,” said a soybean meal trader from Shandong province, a major cattle rancher in China.

($ 1 = 6.3706 yuan Chinese renminbi)

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Reporting by Hallie Gu in Beijing and Karl Plume in Chicago; Additional reporting by Ana Mano in Sao Paolo; edited by Gavin Maguire and Kim Coghill

Our Standards: Thomson Reuters Trust Principles.


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