26.
11.20
08:37

Soybeans: Is Five Month Chinese Shopping Spree Over?

Some Chinese soybean importers and processors are trying to cancel contracts signed US shipments for December and January after margins collapsed after a steep rally in Chicago futures, multiple sources said yesterday.
This is a first sign of a decline in Chinese demand after a five-month spending spree, which, together with the drought of top producer Brazil, contributed more than a quarter to the reference value for the Chicago Futures Scv1 since the beginning of the harvest year on September 1st Month was 13%.
China is the world's largest importer of soybeans and buys more than 60% of all offers available on the world market.
"Small private soybean importers are trying to wash out US soybean shipments in December and January as crush margins have turned negative," said a trader at a leading soybean processor in China.
"This is important information for those importers who have bought loads but have not set the price on the futures market."
Soybeans are processed into oil, which is mainly used for cooking, and soy flour, an animal feed that is vital to the pig and poultry sectors. China increased its soy imports to a record this year as it has to rebuild a pig herd decimated by the deadly African swine fever in 2018 and 2019.
Beijing has also hastened US soybean purchases to meet Phase 1 of the US-China trade deal, which saw purchases of agricultural produce massively increased. Soybeans have historically been the most valuable commodity export from US farms.
Profitable domestic crush margins combined with multi-year lows for US soy this summer sparked a strong Chinese purchase of US supplies from August, ensuring US exports to China kicked off the 2020-21 crop year at a record pace .
However, the sharp rise in prices in the physical market this month is starting to undermine bullish sentiment among buyers.
While US physical soybean export prices caught up on futures market gains this month, futures premiums buyers must pay to secure supplies have decreased from 93 ct / bu to 63 ct / bu this week just over 30% down, indicating decreased competition between buyers.
Two other sources in China confirmed that some importers are trying to void sales contracts in exchange for cash. This is called “washing out”. This term is used when the buyer and seller agree to cancel a contract.
"It makes sense for small private importers (of US cargoes) to wash out because they have not secured their margins earlier on the futures market," said the manager of a large oil mill in southern China.
"If you bring US beans to China now without hedging, you will lose money."
The sources did not give the number of contracts that have already been canceled or are likely to be washed out.
Soybean prices have been supported in recent weeks by uncertainty about deliveries from Brazil, where it is currently too dry and the next harvest is likely to be delayed.
Argentina, the world's largest supplier of soybean meal and soybean oil, has also been dry, but recent rains across South America have improved the situation.

Source
Hansa Terminhandel GmbH
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