Chinese soybean buyers halt purchases from the US, but keep up shipments

04.05.2018

China may not be buying soybeans from the US, with Beijing threatening a steep tariff on imports.

That is, Chinese importers did not register as major buyers of US soybeans in US Department of Agriculture export data for the week to last Thursday.

In fact, as they ended up "net cancelling 133,700 tonnes in resale and destination changes", as Benson Quinn Commodities noted.

(The 416,300 tonnes that the US did sell, a figure towards the lowish end of market expectations of 300,000-600,000 tonnes, went largely to Mexico and Vietnam, which took 74,200 tonnes, including 66,000 tonnes switched from China.)

Still, China showed as the top destination for US soybean exports in the latest week, accounting for 193,100 tonnes of the 691,200 tonnes shipped, which was actually a five-week high.

Switch to Brazil

That is the same kind of behaviour they showed for sorghum, after Beijing in February unveiled an antidumping probe on imports of the grain from the US, so hinting at tariffs (which have now been imposed, through a 178.6% deposit scheme).

In the two months or so between the probe and the levy’s introduction in April, new Chinese purchases of sorghum stalled, but shipments of existing orders kept on coming – albeit with some of these now being diverted to other destinations.

And Chinese importers may want to make the most of their US orders, given that their swing to focusing on Brazil has put a large premium on soybeans from the South American country.

Soybean prices in the port of Paranagua on Wednesday stood at R$87.30 per 60 kilogramme bag, their highest since July 2016, according to research institute Cepea, with dollar values not far from similar highs.

‘Margins turned negative’

Indeed, Terry Reilly at Chicago broker Futures International flagged reports that “China crush margins turned negative for the first time since February amid high Brazilian soybean prices”.

Shanghai-based analysis group JCI puts crush margins in the eastern province of Shandong at a negative 42 yuan per tonne for this week, compared with a positive 21 yuan per tonne a week ago.

This when crush margins in the US are, in Chicago, at their highest since late 2014, and cited by Archer Daniels Midland and Bunge as a big boost to profits.

Cotton prices ease off

The USDA data showed corn export sales at 1.02m tonnes for the latest week, for 2017-18, a little ahead of the 700,000-1.0m tonnes that investors had expected, with Mexico, Colombia and South Korea big buyers.

However, for cotton, export data were not so well received, with July futures opening jup a 0.7% decline, to 84.12 cents a pound, after the USDA report.

This even though shipments – the important number, given the back-up of orders – came in at a three-week high of 432,550 running bales for upland cotton alone, well ahead of the pace needed to meet the USDA forecast for 2017-18.

OK, the export sales number, at 189,900 running bales for upland cotton, was soft, the third lowest for a 2018 week.

But it took total commitments (ie outstanding sales plus completed exports) to 15.8m running bales, ie even further ahead of the number the USDA believes will be shipped.

And there were nearly 300,000 running bales of sales on top for next season.

‘Still dismal’

Wheat data were also seen by some as disappointing, with US export sales coming in at 234,800 tonnes for this season, down 21% week on week and soft by historical standards, if towards the top end of market forecasts of figure of up to 300,000 tonnes.

The figure for 2018-19 (which for wheat starts next month in the US) was mid-range, at 210,300 tonnes.

The data were “still dismal”, Futures International’s Terry Reilly said.

This was particularly so for spring wheat, which accounted for only 14,211 tonnes of old crop sales, although punch a little harder for 2018-19, at 58,550 tonnes.

Soft red winter wheat, as traded in Chicago, by contrast, did OK for 2017-18, achieving sales of more than 56,000 tonnes, a seven-week high, but only 22,600 tonnes for new crop.

Sales vs exports

Sales of hard red winter wheat, traded as Kansas City wheat, came in at 107,937 tonnes, a five week high, for old crop, and at 93,459 tonnes for 2018-19 – the best showing yet for next season.

Actual exports of hard red winter wheat, however, at 32,753 tonnes, stood down 82% week on week, showing their second worst performance of the past two years.


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