Soybean imports forecast at two-year low crimp China’s ailing hog feed makers

A Chinese ship is loaded with soybeans at Port of Santos May 19, 2015. REUTERS/Paulo Whitaker

China’s soybean imports are likely to drop to their lowest in more than two years this month, adding to tight supplies of the key animal feed ingredient soymeal and exacerbating the problems of the country’s hog feed manufacturers.

Soybean arrivals in China, the world’s biggest importer, are estimated to be around or slightly below 5 million tonnes in October, according to two traders and Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney. Imports of 5 million would be the lowest since March 2020.

Soybeans are crushed to make cooking oil and soymeal, a protein rich raw material used for animal feed. Chinese soymeal prices are expected to trade near record highs as feed makers, already grappling with negative profit margins, struggle to find supplies to meet demand, said two Singapore-based soybean traders.

“Crush margins have been in negative territory for several months which is resulting in lower imports,” said IKON Commodities’ Houe.

Lower Chinese soybean imports may weigh on benchmark futures in Chicago Sv1 at a time of overall rising food commodity prices, but the record soymeal will likely translate to higher prices for pork, the favoured meat in China. Hog prices have climbed more than 40% since March.

Cash soymeal prices rose to a record of 5,600 yuan ($787.24) a tonne in northwestern China’s city of Xi’an at the end of September, according to Shanghai JC Intelligence Co Ltd (JCI).

“A bulk of the soymeal to be produced in October and November has already been sold out,” said one of the Singapore-based traders, who works for an international company which owns processing units in China. “Feed manufacturing companies which delayed purchases are now suffering as they have to pay very high prices.”

China’s soybean imports have declined in recent months, discouraged by poor processing margins, which have been negative much of the time since mid-April. Crushers in the key processing hub of Rizhao were losing more than 86 yuan for each tonne of soybeans as of Sept. 30.

The country’s soybean imports are estimated to have slid to 5 million tonnes in September and fell almost 25% in August from a year earlier, according to customs data.

“Some factories had to such down operations while other are working much below their capacity,” said the second Singapore-based trader. “Typically, the industry operates at around 70% of its capacity as there is more capacity than the demand.”

Feed makers have been reducing the component of soymeal used in hog feed to less than 20% from the usual around 30%, the trader said.

“This does not mean that pigs will die of hunger, it just means that the growth rate will slow down.”

China accounted for around half of the world’s pork consumption of 110 million tonnes in 2022, according to U.S. Department of Agriculture data. The country buys more than 60% of soybeans shipped worldwide to fatten the world’s biggest pig herd.

Still, imports are expected rise later this year to replenish the soymeal shortage and as beans are harvested in the United States. China’s imports in November are likely to climb to as much as 9 million tonnes and to about 10 million tonnes in December, according to estimates from JCI and the two traders.

Source: Reuters