Key facts
- China's soybean buying is likely to decline in the months ahead due to weak animal feed demand and negative crush margins.
- Soybeans were excluded from China's proposed tariff reduction list on US farm products.
- Private Chinese oilseed processors have largely secured supplies from Brazil and Argentina through early February.
- US soybeans face an additional 10% tariff, making them uneconomical for commercial buyers.
- Crushing margins for US soybeans are currently in the red.
- Soybean inventories at Chinese crushing plants reached 7.96 million tons in the week of September 25, the highest in at least 15 years.
China's soybean demand is expected to weaken in the coming months, dimming prospects for US cargoes due to sluggish animal feed demand and negative crush margins. This comes after China excluded soybeans from a list of proposed tariff reductions on US farm products following trade talks between Presidents Xi Jinping and Donald Trump.
Private oilseed processors in China, the world's largest soybean importer, have largely secured their needs through early February with supplies from Brazil and Argentina, along with state reserves. Traders and crushers indicated that further purchases are unlikely as they would incur losses.
While Chinese state-run companies have purchased approximately 13.7 million metric tons of US soybeans currently being harvested, private crushers have focused on South American shipments. US soybeans remain subject to an additional 10% tariff imposed during the trade war, rendering them uneconomical for commercial buyers.
Brazilian soybeans were quoted at par with US cargoes this week, around $590 per ton including cost and freight, excluding tariffs. Brazilian beans are often preferred by crushers due to their higher oil content.
Benchmark Chicago soybean futures have declined 1.5% this week and are expected to face further losses as the US harvest peaks and China slows its purchases. Crushing margins for US soybeans scheduled for November shipment are negative, ranging from 120 to 200 yuan per ton in the red. LSEG data showed that crushers in Rizhao were losing 33.54 yuan per ton processing soybeans on Tuesday.
Import demand has been further weakened by high inventories at crushing plants and anticipated softer fourth-quarter feed demand, exacerbated by shrinking sow herds due to government efforts to curb overcapacity in the hog industry. Soybean inventories at 111 Chinese crushing plants reached 7.96 million tons in the week of September 25, the highest in at least 15 years. A recent auction by Sinograin saw only 37.3% of the offered 514,000 tons sold, indicating weak buying appetite.
Chinese buyers booked approximately 50 soybean cargoes in the first three weeks of September, the lowest volume in four years. State-run companies COFCO and Sinograin accounted for about 30 US cargoes, while private buyers sourced the remainder from Brazil and Argentina. Analysts suggest that commercial buyers are unlikely to book more overseas cargoes unless margins improve, and may turn to reserve auctions or idle plants rather than importing more beans if supplies tighten.