China is expected to import record volumes of soy in July, attracted by lower prices and the prospect of Donald Trump returning to the presidency and reigniting trade tensions between Beijing and the US, which was once China's main supplier of the oilseed.
The world's biggest soybean importer has seen higher volumes in recent weeks, traders and analysts said.
“Chinese soybean importers are buying larger volumes as they are trying to protect themselves as much as possible from a possible increase in US tariffs if there is a trade war after the US elections,” said Vitor Pistoia, an analyst at Rabobank in Sydney.
However, the impact of any trade escalation is likely to be muted for Chinese soybean buyers, given the drop in market share for U.S. beans that was triggered during Trump's presidency.
The Trump administration's tariffs on Chinese goods have provoked retaliation from Beijing, including a 25% tariff on US grains, which has forced oilseed processors to seek alternative cargoes from South America, reducing US soybean exports for China to 16.6 million tonnes in 2018 from 32.9 million tonnes in 2017.
Although the US and China signed a deal in January 2020 in which Beijing committed to buying more US agricultural products, including soybeans, the US has ceded market share as the ample supply of cheaper Brazilian grains has consolidated. in China.
Last year, Brazil accounted for 70% of China's soybean imports, while the US share was 24%. Although North American grains are no longer subject to additional taxes.
Demand scenario
Chinese buyers have reserved 12 million to 13 million tons of soybeans for July, according to Singapore traders and China analysts. This compared to 9.73 million tons shipped in the same month of the previous year.
China's soybean imports reached a monthly record of 12.02 million tons in May 2023.
One of the traders, who declined to be identified because he was not authorized to speak to the press, said: “If there had been no fear of the trade war, demand in China in July would have resulted in purchases of 10 million tons.”
China's soybean crush margins are negative but expected to improve with growing demand for animal feed, traders say.
Low prices are one of the main drivers of purchases from China. Benchmark Chicago soybean futures fell to their lowest level since 2020 on Monday on expectations of abundant global supplies.
Global soybean production is expected to reach an all-time high of 422.26 million tonnes in 2024/25. Up from 395.91 million tons produced in the current commercial year, according to estimates from the US Department of Agriculture.
Most of China's purchases come from Brazil
Luiz Fernando Roque, an analyst at Brazilian consultancy Safras & Mercado, said that a weaker real against the dollar encourages soybean exports. He does not see the prospect of Trump returning to office as a factor influencing the Brazilian market for now.
Still, he said, “Trump’s victory appears increasingly imminent. This poses risks for China, given what has already happened in his first term.”
Source:Naveen Thukral and Mei Mei Chu | Notícias Agrícolas
