China is likely to finish the 2018-19 marketing year for soybeans importing less than official projections.
With the monthly soybean import volume of 8.64 million metric tons (317.5 million bushels) in July and an expectation of 9.1 million metric tons (334.4 million bushels) in August, China is expected to import 82.0 million (3.01 billion bushels) of soybean in 2018/19 crop year, less than the estimation of both USDA and China Ministry of Agriculture.
“The market was expecting an import of 9.41 million metric tons earlier, but as the demand for soybean meal and soybean oil are slow in the country, plus the uncertainty of U.S.-China trade relations, some crushers postponed their shipment and end up arriving only 8.64 million metric tons,” said Dr. Jun Wang, professor of China Agricultural University.
USDA pegged China’s 2018/19 soybean import at 83 million metric tons while China Ministry of Agriculture’s recent estimate was 83.5 million metric tons.
China imported a historically high volume of 94.2 million metric tons (3.46 billion bushels) of soybean last crop year. Based on above estimation, the country will import less than 11 million metric tons (418.1 million bushels) of soybeans in the current crop year.
Lower soybean imports have not translated into shortages so far, largely due to the impact of African Swine Fever (ASF) as well as an economic slowdown in the country, both of which have reduced market demand. “But, as Brazil soybean export window coming to the end and no U.S. new crop soybeans have been booked by traders yet, markets start to worry about the supply at the end of the year,” said Wang.
For the 2019-20 marketing year, China has just 194,000 metric tons of sales booked. Chinese buyers still have 2.8 million metric tons of outstanding sales on the books for the 2018-19 crop year that have yet to ship. The marketing year ends Aug. 31.
From the first breakout of ASF a year ago in northeast China, hog farmers had been struggling with the virus. With the recent report from Ministry of Agriculture, hog stocks in the country reduced to 254 million head, compare to 308 million head at the beginning of the year.
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In a forecast higher than the Chinese government’s official estimates, Rabobank earlier this month projected that the China hog herd could be reduced in half by the end of 2019. Rabobank estimates losses are already close to 40% of China’s hogs.
The ripple effect of ASF is driving down feed demand. Statistics from China Feed Association shows a total feed production of 36.3 million metric tons in the first half of this year, a decrease of 14% compare to same time last year. Hog feed production fell 27% in June, compare to the same period of last year.
Soybean meal prices have come down. September soybean meal contract in Dalian Commodity Exchange (DCE) reached a high price of RMB 3031 per ton ($429 a ton) in June 4 last year after U.S.-China trade war started. Soybean meal kept a lower price after that, even though soybean import volume was much lower than last year. Today, the price of this contract is RMB 2889 per ton ($409).
U.S. SOYBEAN IMPORT IS LIMITED IN BOTH OLD CROP AND NEW CROP
U.S.-China trade war led China to put a 25% tariff on U.S. soybeans from last year. Though the Chinese government promised to buy 20 million metric tons of soybean from U.S., the two state-owned companies, COFCO and SinoGrain only bought 14.3 million metric tons.
The U.S. And China are expected to hold further negotiations in September, but Chinese buyers have no idea of what import tariff they will face this fall importing U.S. soybeans.
“From last October, there were 174 bulk U.S. soybean shipments carrying about 60,000 metric tons (2.2 million bushels) of soybean each inspected and shipped to China, while there are another 26 cargos waiting to be loaded at PNW,” said Wang, “But, nobody knows how many cargos Chinese crushers will be able to buy in the 2019/20 crop year as the trade war goes.”
BRAZIL SOYBEAN IMPORT DRYING UP SOON
The Chinese market is mainly dependent on Brazilian soybeans from last year.
By the end of August, Brazil should have exported 63 million metric tons of soybeans, with another 10 million metric tons to export until January when the crop soybean starts to become available. 74% of Brazil’s soybean exports were shipped to China.
“There are not many beans left for export indeed,” said Thiago Piccinin, “Most of the beans are in the south port of Rio Grande,” as soybeans harvested later in the southern state of Brazil. Piccinin is CEO of Lotus Grains and Oilseed, a trading company in Sao Paulo.
Piccinin believe there will be 8 million to 10 million metric tons of soybean left for export and about 80% of those beans will go to China.
“Chinese crushers brought another 30 cargos of soybeans from South American countries, mostly from Brazil, last week, as there is no hope to make a deal between U.S. and China government recently,” said a trader in Beijing, “But, as Brazilian soybean exports dry up, Chinese market will face a shortage at the end of the year.