China’s soybean import demand is likely to slow in the near term as domestic feed consumption softens and crushing economics deteriorate, market participants say, a development that constrains prospects for US shipments after soybeans were omitted from the list of farm goods eligible for tariff cuts following talks between Chinese President Xi Jinping and US President Donald Trump.
While Beijing has agreed to reduce tariffs on a broad set of US agricultural products, soybeans - the single largest US farm export to China - were excluded from the tariff relief package after last week’s Washington summit. That exclusion leaves US soybeans carrying an additional 10% duty that has been in place since the start of the trade war last year, making them uneconomical for commercial purchasers, traders said.
Private oilseed processors in China, the world’s largest soybean importer, say they have already covered most of their requirements through the Lunar New Year in early February with cargoes from Brazil and Argentina and with access to state grain reserves. "We have booked for all of October and much of November shipments from Brazil and Argentina," a senior executive at a Chinese oilseed processing company said. "Most of these cargoes will arrive around the high demand Chinese New Year period. We are not interested in making further purchases as these will incur losses."
According to three Asia-based agricultural traders who requested anonymity, state-run Chinese companies have purchased about 13.7 million metric tons of US soybeans that are currently being harvested, following a trade deal in May. The traders said private crushers, however, have taken only South American shipments.
Price and quality considerations also favour South American supplies. This week Brazilian soybeans were quoted at par with US cargoes, excluding tariffs, at roughly $590 per ton including cost and freight, two market sources - a senior Chinese crushing executive and an Asian-based trader - said. They added that Brazilian beans usually have higher oil content, which makes them more attractive to crushers.
Benchmark Chicago soybean futures have fallen about 1.5% so far this week, and the market may face further downside as the US harvest accelerates toward its peak while China pulls back on purchases, traders and analysts said.
Crushing margins and inventories
Crushing margins are under pressure. For soybeans slated for November delivery from the US Pacific Northwest and the US Gulf, margins are 120 yuan to 200 yuan per ton in the red, while Brazilian soybeans show about minus 120 yuan per ton, Rosa Wang, an analyst at Shanghai JC Intelligence, said. LSEG data showed crushers in Rizhao, a main processing hub, recorded a loss of 33.54 yuan per ton for processing soybeans on Tuesday.
Import demand has cooled as processing plants are carrying elevated inventories and expect weaker fourth-quarter feed demand. The contraction in sow herds, driven by government measures to reduce overcapacity in the hog sector, is reducing demand for feed, industry sources said.
Consultancy Mysteel reported that inventories at 111 Chinese crushing plants reached 7.96 million tons in the week of September 25 - the highest level in at least 15 years. Mysteel data also showed weak uptake at state sales: in Sinograin’s most recent auction of imported soybeans, only 37.3% of the 514,000 tons offered were sold.
Bookings and market behaviour
Booking activity in September was unusually low. Eduardo Vanin, senior agriculture strategist at Marex in Curitiba, Brazil, said Chinese buyers reserved around 50 soybean cargoes in the first three weeks of September, the fewest in four years. He added that state-controlled firms COFCO and Sinograin accounted for roughly 30 US-origin cargoes, while private buyers booked the remainder from Brazil and Argentina.
Market consultants and traders said further overseas purchases by commercial buyers are unlikely unless margins improve. "Unless margins recover, commercial buyers are unlikely to book more cargoes from overseas," Johnny Xiang, founder of AgRadar Consulting in Beijing, said. He added that if domestic supplies become tight, buyers are more likely to look to reserve auctions or to idle plants for maintenance rather than increase imports.
Exchange rate reference: $1 = 6.7045 Chinese yuan renminbi.