December 11, 2020

 

China gets early start in buying crops from US

 

 

China has started buying soybeans from the United States for next year's crop, much faster than traders and analysts expected.

 

While other buyers bought fewer than five cargoes, China has been picking up US cargoes over the past week as purchases came earlier than the usual end of the first quarter.

 

The country is loading up on US crops from corn to soybeans to feed a hog population that's recovering from African swine fever, a deadly pig disease.  The Chinese economy is also recovering from the COVID-19 pandemic, helping boost demand for food.

 

"To me, it is an indication they have a big purchase programme for next year," said Stephen Nicholson, a senior grain and oilseed analyst at Rabobank. "The Chinese have such a big book to buy that needed to get started sometime, because the longer they wait, the higher the probability of running the price upon themselves."

 

On November 30, Chinese buyers continued to ask for more offers for supplies for the 2021 to 2022 season.

 

As dry weather is delaying crops in Brazil, the world's largest soybean producer, another speculation arose that China will need to turn to the US to buy supplies for February.

 

According to AgResource, the price difference between the Brazilian and the US supplies for February is narrow, and it's almost impossible to find offers from Brazil for the first half of February.

 

"The delay in Brazilian seeding combined with recent dry weather has delayed the crop and pushed back maturation," the consultants said in a report. "This has exporters scrambling. Brazil has a quality and freight advantage into China, but other world importers will be prodded to cover their soy import needs from the US," AgResource said.

 

China may also be concerned about the impact of a La Niña weather have on crops at a time Brazilian inventories have dried up.

 

"Without a doubt, it's unusual for China to be going out that far ahead at this time frame," said Tom Fritz, partner at Chicago-based EFG Group LLC. "It might be a slight hedge against a short Brazilian crop."

  

 -  The Business Times