China’s soybean imports from US shipments in 2021/22 are expected to drop sharply from last season, following shipment delays due to Hurricane Ida.
A higher-volume Brazilian soybean crop expected for early 2022 has also shortened the US export window to China, the world’s largest soybean buyer.
China’s total US soybean imports for the business year that began Sept. 1 could fall by at least 20% to less than 30m tonnes, according to analysts and leading importers.
US farmers have just harvested their second-largest soybean crop in history and typically export around 45-50% of annual production.
More than half of those sales tend to go to China, which in turn does about 70% of its soy business in the US during the September-December post-harvest window.
But this year, the aftermath of Hurricane Ida — which hampered crop loading at major US ports for several days in September — resulted in an 81% drop in shipments to China that month from a year earlier, according to data from US Department of Agriculture.
In addition, the main drivers of China’s soybean demand — crush margins and hog production — hit a soft spot during the peak US harvest window, dampening China’s appetite for US supplies.
US shipments increased dramatically in October to more than 10m tonnes, according to Refinitiv data, but now face the prospect of an earlier-than-normal start to the 2022 export season from Brazil, the world’s largest producer of soybeans.
“The US export (soybean) crop got off to a bad start this year. Crush margins were low and demand was not good at that time,” said Bai Jie, an analyst at Cofco.
“Then there was the impact of hurricane Ida. And part of the US market was squeezed by Brazilian grain,” said Bai.
Disadvantage
US soybean shipments to China in 2020-21 were the strongest since the 2016-17 season, thanks in part to the late start of Brazil’s 2021 export season that helped boost US sales.
“The American grain will not have this opportunity in the coming months, as Brazilian grain planting is fast this year, which means there will be a large shipment of grain to China in the first quarter of 2022,” said Zou Honglin, an analyst at agriculture division of Mysteel, a China-based commodity consultancy.
Soybeans from the US also faced price headwinds, with export offers trading in close proximity to those from Brazil, where freight costs to China are lower.
In addition, Brazilian soybeans offer better crush margins for Chinese soybean processors, thanks to higher protein levels in Brazilian soybeans, on average.
Margins for US soybeans shipped from the Pacific Northwest for February delivery are around RMB 500 ($78.49) per tonne, compared with RMB 684 for the Brazilian bean, according to Mysteel.
“Brazilian grains are a little cheaper and the price reigns,” says an Asian trader with an important trading company.
“Window is closing”
Chinese soy importers have nearly completed their December purchases and are now meeting their January and February needs as Brazil’s export season lengthens, according to a US exporter.
January soybean shipments from the Gulf Coast were offered at around $500 per tonne fob at the end of last month, with an additional 78 or 80 dollars per tonne for freight to China. Brazilian soy is around US$520 per ton FOB, with freight around US$60 per ton, he said.
“It has been a little disappointing from the US point of view. Brazil is entering our export window a little more each year,” said the exporter. “Our window is closing.”
Soybeans arrivals in China in November-December will be mainly US shipments, but Brazilian shipments are expected to increase dramatically during January-March to over 6m tonnes, according to Zou of Mysteel.
This would represent an increase of more than fourfold from the 1.35m tonnes during the first quarter of 2021.
With China expected to account for nearly 60% of all soybean imports this season, US exporters will not be able to find a single major buyer to replace it. Europe, Mexico, Argentina, Egypt and Thailand are the next five biggest importers, according to the USDA, but together they buy only a third of the total from China.
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