November 26, 2020

 

Chinese soybean importers and processors looking to cancel US orders

 

Three trade sources said some soybean importers and processors in China are looking to cancel their soybean shipments from the United States scheduled for December and January, due to collapsed crushing margins after the Chicago futures steep rally, Reuters reported.

 

This China soybean demand slowdown is the first since China's five month buying spree of the commodity, combined with dry weather issues in Brazil that has added more than a quarter to benchmark Chicago futures since the start of the crop year on September 1, and 13% this month.

 

One trader from a major Chinese soybean processor said small private soybean importers are looking to cancel their signed December and January soybean shipments from the US because crush margins have become negative.

 

The trader said these importers purchased cargoes but did not set prices in the futures market.

 

China accounts for 60% of soybean imports worldwide, making the country the biggest importer of the commodity as it looks to rebuild its swine herd devastated by an African swine fever outbreak.

 

China had also ramped up US soybean imports to fulfil its pledge in the US-China Phase 1 trade deal.

 

US soybean imports to China increased since August due to profitable domestic crush margins plus multi-year low US soy prices. But buyers are now wary of this month's high prices.

 

Even though US soybean export prices are the same with this month's futures markets gain, export basis levels have fallen by over 30%, which shows fewer competition among buyers.

 

Refinitiv Eikon said spot export basis at the US Gulf fell to US$0.63 this week compared to US$0.93 a bushel in early November.

 

The two other sources from China said some importers are looking to mutually cancel their soybean agreements with sellers.

 

One of them, a manager from a major soybean crusher company in southern China, said small private importers can mutually cancel their agreements with US sellers because they did not price in futures market earlier.

 

The sources did not provide details of how many deals were cancelled.

 

Soybean prices have stayed at record highs because of supply uncertainty from Brazil. The country is experiencing dry weather that has delayed crop planting targeted for harvest early next year. 

 

Argentina is also experiencing has dry weather conditions, but recent forecasts of rain has improved their outlook.

 

- Reuters