Woes mount for U.S. soy shippers as China gives Brazil unusual nod

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

Brazil’s soybean exports should be winding down at this time as the U.S. harvest takes center stage, though China’s cancellation of U.S. cargoes on Wednesday was likely evidence that export terminal damage along the U.S. Gulf Coast has spooked buyers.

That has redirected business to Brazil for shipment in October and November, peak U.S. season, as Chinese buyers earlier this week secured up to six costly cargoes of the South American oilseed.

U.S. soybean shipments over the next year are already seen below last year’s high. Though with reduced loading capacity and a possible record harvest on deck in Brazil, U.S. exporters could end up with the short straw, alleviating the historically tight supply situation.

U.S. grain and oilseed shipments have been unusually light since Hurricane Ida knocked out power and damaged key grain export terminals in Louisiana late last month. Some of those terminals have restarted operations, though the Gulf is not yet running at full strength.

China and unknown buyers have been securing small amounts of U.S. soybeans here and there for more than a month. But on Wednesday, the U.S. Department of Agriculture confirmed that a total of 328,000 tonnes of U.S. soybeans sold for export had been cancelled by both Chinese and undisclosed buyers, uncommon for the time of year.

Concerns over China’s soybean demand have lurked in the market for some time now, especially with low profits for hog producers and what had been terrible soy crush margins. China’s agriculture ministry on Friday cut feed consumption for corn over low hog prices, substantiating some of those concerns.

But projected 2021-22 soybean imports were unchanged from last month at 102 million tonnes, up 3.4% on the year. Crush margins in China are around four-month highs though still not great, but the U.S. cancellation and purchase of very pricy Brazilian beans likely signals a need.

Back in 2018, the trade war shook Chinese buyers’ comfort in the reliability of U.S. soy supplies, and some industry participants feared the spat could unintentionally forge a stronger alliance between China and Brazil. Logistical issues in the United States, regardless of the cause, may test that trust.

Brazil’s logistics were nightmarish several years ago as vessels sometimes awaited loading for well over a month outside major ports due to multiple inefficiencies. But extra loading capacity, improved roads and expanded usage of northern ports have all increased Brazil’s durability as top soybean supplier.


Preliminary data shows Brazil’s January-August soybean exports at 72.7 million tonnes, down 2.5% from a year ago but easily second-best for the period. However, the record harvest earlier this year was at least 7% larger than the previous despite the late planting and harvest due to abnormally dry conditions a year ago.

Soybean planting is just now starting for Brazil, which remains dry, particularly in the south. If farmers delay planting because of dry weather as they did last year, it could affect the timing but not necessarily the size of Brazil’s supply availability early next year.

Brazil’s crop keeps expanding into uncharted territory. USDA has pegged the upcoming 2021-22 harvest at 144 million tonnes, up 5.1% on the year, and Brazil’s Conab last month placed the crop at 141.3 million tonnes, up 3.9%.

Brazil ran down soybean stocks late last year after setting eye-popping records during peak shipment season in April and May. Those peak-month records were broken this year despite the harvest delays, helped by the fact farmers got a very early start on 2021 sales due to strong prices.

But those prices rose further and caused regret among farmers who sold early, so they may be stingier sellers for the 2022 crop if they think higher prices are coming. Earlier this month it was reported that Brazilian producers to date had sold about half the year-ago soy volumes.

In the past, Brazil shipped almost all its soybeans by this time of year, when U.S. supplies are beginning to come online. But traders were surprised in late 2018 that Brazil was still exporting notable volumes of the oilseed in the early stages of the U.S.-China trade war.

Brazil’s unexpected supply and severe hog disease across China helped the Asian country mostly avoid U.S. soybeans in late 2018 amid tense trade relations. Brazil shipped almost as many soybeans in late 2019, and some market participants wondered if U.S. exporters’ advantage at this time of year was permanently scarred.

Part of the problem with Brazil’s surprise supplies in late 2018 and 2019 was that the country’s crops and stocks had been chronically underestimated by both USDA and Conab, and those agencies have since revised past assumptions.

Source: Reuters