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Soaring Chinese soybean stocks to curb import growth - USDA

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September 6th, 2017

US officials cautioned over expectations of a substantial rise in Chinese soybean imports, citing the "high" stocks of the oilseed already bought, amid market questions over a slow pace of US export orders.

The US Department of Agriculture's Beijing bureau pegged at 92.5m tonnes soybean imports by China, the world's top buyer, in 2017-18 on an October-to-September basis.

While a rise of 1.5m tonnes year on year, and representing a record high, the forecast is well below the USDA's official forecast of 94.0m tonnes.

It also comes amid persistent market questions over US soybean exports in the new season, with advance orders down 39% year on year.

Soybean Futures: 'Competitive prices'

The bureau, relatively, weak forecast for China's soy imports was attributed to a hangover from strong purchases for 2016-17, for which growth in buy-ins was pegged at 7.8m tonnes.

"Adequate global soybean supplies at competitive prices have encouraged Chinese buyers to increase imports since late 2016," the bureau said in a report.

In July, "China's monthly soybean imports hit a record of over 10m tonnes," a gain of 30% year on year, a jump "partially due to the government's reduction, of two percentage points, to the value added tax", a cut that came into effect at the start of that month.

Soybean imports, which for the January-to-July period were up 16.8% at 545.89m tonnes, "could have been even higher if some traders had not chosen to resell some of their shipments to other markets during July and August".

Soybean Futures: 'Negative margins'

However, with consumption of the soybeans unable to keep pace with their supply, "the resulting high soybean stocks left at the end of 2016-17 will temper net import growth in 2017-18", the bureau said.

Margins enjoyed by soybean crushers have since February "turned negative", a trend that "is expected to continue during the last months of 2016-17".

Prospects for China's import growth are "considerably lower" than in 2016-17, for which buy-ins were seen rising by 7.8m tonnes.

Crushers close

The comments follow a series of reports last month of Chinese crushers suspending operations in the face of weak margins, which were weighed by the dent to soymeal prices from a build-up in inventories of the feed ingredient.

Dalian soymeal futures in June hit a 14-month low of 2,460 yuan a tonne, on a spot contract basis.

Processors in Shandong, China's top crushing region, were actually estimated by Reuters on Tuesday to be seeing positive crushing margins, but at a weak 8.17 yuan per stonne of soybeans.

Ports are also said to have been overwhelmed by the volumes of soybean imports – prompting indeed some merchants to seek alternative markets for some cargos.

'Running behind pace'

Meanwhile, in the US, there remain concerns over a slower pace of export sales orders for 2017-18, which started in the country on Friday, despite a flurry of recent purchases by Chinese buyers, typically of 136,000 tonnes.

"This seems to be repeater number we have seen near daily for the last three weeks," said Benson Quinn Commodities, while flagging that China's "new crop purchases running behind pace".

Indeed, China had, as of August 24, purchased a little under 5.0m tonnes of US soybeans for delivery in 2017-18 (on a September-to-August basis) - a figure down 39% from the year-ago comparative.

Overall US soybean export sales for 2017-18, at 11.5m tonnes, are also down 39% year on year.

Nonetheless, the USDA's Beijing bureau forecast that the US would supply 35.0m tonnes of the soybeans purchased by China in 2017-18 - up from an official USDA forecast of 30.0m tonnes.

The USDA will next week update its official world crop and supply estimates, in its monthly Wasde report.

 - Agrimoney.

See Also: Corn Futures, Soybean Futures, Wheat Futures
Soybean futures, Corn, Wheat Tumble on Indications of Reduced Demand From Japan
By Jeff Wilson and Whitney McFerron - Mar 15, 2011

Soybean futures and corn tumbled the maximum allowed on the Chicago Board of Trade and wheat plunged the most in seven months on concern that the earthquake and nuclear crisis in Japan will reduce raw-material demand.

Equities in Japan had the biggest two-day drop since the 1987 crash as the risk of radiation leaks north of Tokyo escalated. U.S. Treasuries surged. Japan is the world’s leading buyer of corn, the third-largest importer of soybeans and the fifth-biggest purchaser of wheat.

“Increasing levels of radiation have people dumping positions in stocks and commodities and piling assets into cash,” said Alan Brugler, the president of Brugler Marketing & Management LLC in Omaha, Nebraska. “There’s increased risk aversion until the situation stabilizes in Japan.”

Corn futures for May delivery fell by the CBOT limit of 30 cents, or 4.5 percent, to close at $6.36 a bushel at 1:15 p.m., the lowest since Jan. 20.

Soybean futures for May delivery declined the 70-cent maximum, or 5.2 percent, to close at $12.70 a bushel, the lowest since Dec. 13.

Wheat futures for May delivery dropped 53 cents, or 7.4 percent, to close at $6.6775 a bushel in Chicago, the biggest decline since Aug. 6.

Oats fell the 20-cent maximum to a six-month low, while rice and soybean-oil futures also fell by the exchange limits in Chicago.

Shipments into Kashima and other ports on Japan’s east coast were stopped because of power outages after the 9.0- magnitude earthquake and tsunami, Zen-Noh, Japan’s largest corn buyer, said yesterday. Japan said today it plans to buy 32,381 metric tons of wheat in a tender on March 17, 76 percent less than it purchased last week.

Screen Imports

Asian countries moved to screen food imports from Japan following explosions at the Fukushima nuclear plant that raised radiation levels at the complex to harmful levels.

South Korea, Indonesia, Thailand, Malaysia, Singapore and the Philippines took steps to check fruit, vegetables, meat and seafood from Japan for nuclear material.

“It’s a fear-driven trade” focused on Japan, said Frank Cholly Sr., a senior strategist at Lind-Waldock, a broker in Chicago. “Demand is going to slow down, because even though they need to eat, they have more urgent things. They’ve got to stop the radiation leak, and they’ve got to find any survivors.”

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, government figures show. Wheat is the fourth-largest, behind hay, at $13 billion.

 - Jeff Wilson and Whitney McFerron in Chicago at Bloomberg.