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Soybean Futures Seen Rising on Strong Chinese Demand for U.S Beans; 74% of Sep Soy Imports Comprise Brazilian Soybean

26 Oct 2020 12:04 pm
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Mumbai (Commodities Control) - China's soybean imports in September consisted mostly of cheaper Brazilian beans purchased in earlier months when the South American beans were sold at an average discount of 10-20 cents/bushel to their US counterpart, market sources said.

While the Brazilian soybeans accounted for 74% of total Chinese oilseed imports in September, a 51% year-on-year increase to 7.25 million mt, the US beans contributed a mere 12% at 1.17 million mt, compared with 1.73 million mt in the same period last year, China's customs data showed Oct. 25.

The Brazilian real had lost over 40% of its value against the dollar in the last 12 months, making Brazilian soybeans extremely competitive in international markets, particularly in the first half of 2020.

The Chinese crushers cashed in on this opportunity and bought large volumes of Brazilian beans between February and June, as the weak real supported farmers selling to international traders.

Brazil exported 79 million mt of soybeans between January and September, up 30% year on year, with 73% of them destined for China, according to the latest Brazilian trade department report.

According to China's monthly customs report released Oct. 13, the world's top soybean consumer imported 9.79 million mt of beans in September, up 1.9% month on month and 19% on the year.

China's soybeans imports were the highest on record for August and this trend has continued in September as the country's pig herd was recovering from the African swine fever epidemic, market sources said.

China lost over 50% of its swine population to ASF, which started in August 2018. Following large scale quarantine measures and the culling of more than 200 million pigs, the country's pig population has been on the path of recovery since late-2019.

According to the latest Agricultural Ministry of China's report, the country's pig herd increased by 31.3% year on year, while the sow herd had risen 37% in August, YoY.

Boosted by a rising pig herd, China's soybean imports in 2020-21 (October-September) marketing year is forecast to touch an all-time high of 100 million mt, the USDA said in its latest supply and demand report Oct. 9.

While China purchased the bulk of its soybean shipments from Brazil in earlier months, its focus is set to shift to US soybeans from September as Brazil's supply is limited.

Brazil has already sold over 98% of its old soybean stock and is only left with a small volume for domestic demand, a China-based crusher said. "So, our attention has now shifted to the US beans," he added.

US soybean harvest has been progressing at a swift pace, which signals ample supply to the Chinese crushers in the coming months.

A healthy US soybean harvest coupled with Brazilian planting delays mean a significant boost to the US soybean sales between September and February 2021, analysts said.

Chinese crushers are frantically purchasing US beans for January shipments to cover for supply-side uncertainties from Brazilian beans planting delays, a Chinese commodities trader said.

Despite a few bouts of technical selling, November soybean futures have been trading at multi-year highs in the range of $10.75/bu-$10.86/bu on the Chicago Board of Trade in the week ending Oct. 24.

Soybeans futures prices are expected to rise on strong demand from China, coupled with limited bean supply in the coming weeks, analysts said.

(Commodities Control Bureau)

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