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China's soybean imports are expected to slow sharply at the end of 2021 after reaching a record in the first half of the year, frustrating expectations of sustained growth in the largest global buyer of the oilseed and affecting market sentiment precisely at a time when North American producers they seek to sell their new crop.
A collapse in the profitability of the pork sector and a sharp increase in the use of wheat as animal feed are driving demand for soybeans in China, where changes will now fall below 100 million tonnes this year, compared to a recently published estimate of 102 million tonnes. by the United States.
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With China responsible for 60% of global soybean imports, its reduced appetite – as US producers move to harvest what is projected to be the third-largest crop in history – is likely to add even more volatility to the commodity, which has reached highs of nine years in 2021.
“Demand for soybean meal is bottoming out. The base is now at minus 120 yuan (in northern China), the lowest level this year. Demand could rise again, but right now it sucks,” said a manager at a crushing company in northern China, which processes an average of two loads of soybeans per month.
“We cannot place orders for purchases. The volume of US exports will be affected.”
His factory only has one isolate reserved for August – normally, it would be full by the end of October. With the current situation, soybean indicators in Shandong have suffered a loss of almost 400 yuan for each crushed ton of the oilseed.
China imported a record 48.95 million tonnes in the first half of 2021, up almost 9% year-on-year, as its pig herd recovers from the outbreak of a deadly disease and Brazil – the world's biggest soybean producer – shipping a record harvest. Now, however, demand is staggering, according to analysts.
“The momentum of imports at the beginning of the year was very strong. But since May, year-on-year growth has been slowing down,” said Zou Honglin, analyst at Myagric.com.
“Signs do not look optimistic for a recovery at the moment. Domestic crush margins are still in the red, while signs do not look optimistic for elevated soybeans,” said Howie Lee, economist at OCBC Bank. “Using new crop orders from the US as a proxy, China has not placed as many orders as in 2020.”
Source: Reuters
