August 11, 2020
China's traders say US soy purchases set to increase in fourth quarter
Chinese importers are set to boost soybean purchases from the United States to fulfil demand for livestock feed in the country, with the increased purchases coinciding with the beginning of the US harvest season, Reuters reported.
8 million tonnes of soybeanare projected to be imported to China monthly between October and December, the majority arriving from the US, according to four anonymous traders and crushers.
The expected higher purchases come as China tries to meet its pledge to buy more US agriculture goods as part of a Phase 1 trade deal signed with the US earlier this year.
A China-based trader from a major trading house said crush margins are healthy, with estimations of big US soybean volume purchases in the fourth quarter. The trader said demand from the swine and poultry sectors are higher than expected.
Another source from a major crusher said US soybean crush margins are good and Brazilian soybean supplies have depleted in the fourth quarter, so imports from the US will go up anyway regardless of the Phase 1 trade deal.
China' Shandong province, a major soybean processing hub reported crush margins at RMB 289 (~US$41.48; RMB 1 = US$0.14) a tonne on the JCI-SBMG-SHDNI on July 7. In July, margins were RMB 367 (~US$52.80), the highest on record compared to three months prior.
Traders were concerned that the record Brazilian soybean imports would lead to a backlog in soybean inventories and affect crush margins.
However, the poultry industry are digesting stocks fast. China's poultry industry is rapidly expanding, with swine production steadily recovering.
Traders said soybean imports from the US could further increase as several importers are waiting for US prices to decline during the harvest.
China's state companies could be directed to buy more US soybeans to boost state stockpiles and protect against food security disruptions caused by COVID-19.
The source tied to a major China crusher said they are still open for the last two months of the year and will be able to import as many US soybeans as they can due to burgeoning demand.