March 31, 2020


China's soybean crushers fear supply shortage


Chinese soybean processors fear the spread of COVID-19 in major exporting countries could lead to further supply shortages.


Some plants in the world's biggest buyer are already having to wind back operations, industry sources and traders stated. Top producers Brazil and Argentina have warned of possible delays in getting beans to ports because of transport and other restrictions to control the virus. The moves come after delayed shipments from Brazil due to rains in late February have slashed Chinese inventories to record lows.


Crush margins <CNSOY-RZO-MRG> in Rizhao, Shandong province, a major processing and import hub in northern China, spiked sharply higher over the past two weeks to hit CNY360 (US$50.73) a tonne, the highest in eight years.


"I am worried about logistics (in export countries). If something goes wrong, it will be great trouble for us," the manager of a crushing plant in southern China said.


The plant was currently operating only one its two lines due to a shortage beans as an expected cargo had been delayed by at least a week.


"Margins are really good now. Once the beans arrive, we will have to crush at full capacity," said the manager, who declined to be named as he was not authorised to talk to the media.


China turns soybeans into cooking oil and soymeal, used in animal feed for the world's biggest pig herd.


"Shipping from port to port is not an issue, but the problem is getting soybean supplies to ports by trucks," said one Singapore-based grains trader, referring to Brazil.


Benchmark Chicago soybean futures have risen nearly 2% this week, rising for a second week in a row, although globally there is no shortage of soybeans, with Brazil producing a record crop.


Still, China's national weekly soybean inventories have fallen sharply, reaching 3.316 million tonnes by March 23, their lowest levels since at least August, 2010. Soymeal stocks <CFD-SBMST-NATN> are also at a 10-year low at 325,700 tonnes.


The shortage comes amid a turnaround in the fortunes of crushers following the coronavirus epidemic that started in China last year. A steep fall in the number of new cases has allowed Beijing to push for restarting economic activity.


"Just a month ago, our plants in southern China were begging clients to come buy the products, as demand was flat with the coronavirus outbreak at its peak," said a source with a major trader and crusher.


"But now, our positions have completely reversed. We have a shortage of goods, and clients are lining up, begging to get meal from us," the source said, declining to be named as he was not authorised to speak to the media.