Chinese traders have slowed their buying for October soybean shipments amid the expectation that Beijing and Washington could reach a trade agreement during talks in Washington in September, sources said.
China has bought about 4 million mt of soybeans for October shipment out of the 6.6 million mt it has contracted to buy for the month, according to the sources, leaving 40 percent of the month’s purchases uncovered. Chinese buyers are still on schedule for their October purchases, so they can afford to wait to observe market movements related to the upcoming trade talks.
Another factor affecting the Chines soybean demand is the decreasing crush margin.
A trader said that in China, “Domestic crush margin is currently very low, and anticipating a probable positive outcome from the September trade talks, the market is just waiting for clearer directions” for October purchases.
Rising Brazilian soybean prices are a major concern for Chinese traders because Brazil fulfills 75% of China’s soy demand, sources said. Brazilian prices have risen more than 12% since April.
SOYBEX FOB Santos for October loading were assessed at $368.74/mt Thursday, and similarly, SOYBEX FOB Paranagua for October loading was assessed at $368.74/mt, while SOYBEX FOB New Orleans soybeans for October loading were assessed at $333.08/mt Thursday, according to S&P Global Platts assessments.
China used to be the biggest market for US soybean farmers, buying about 55% (30 million mt) of their output annually, US Department of Agriculture data showed.
Since July of last year, US-China trade tensions have escalated, with both sides levying multiple retaliatory tariffs on each other. Despite several rounds of talks since December, an agreement couldn’t be reached. As a result, overall US soybean exports fell to 45.7 million mt in 2018-19 (July-June), down 19% year on year, as sales to China plummeted 75%, the USDA data showed.
US-China trade relations hit a new low this month when both sides announced another round of retaliatory tariffs. While the Trump administration has been accusing China of not buying enough US agricultural products as promised, Beijing has been accusing the US of bullying during talks.
As US soybean farmers confront plummeting soybean sales and prices, the Chinese market may experience supply-side constraint in the fourth quarter as South American soy inventory depletes, a trade source said.