China increases soybean imports and processing and cancels purchase agreements

According to the China National Grain and Oil Information Center (CNGOIC), during October 19-25, China increased the volume of soybean processing by 29% compared to the previous week to 2 million tons, which is 27% higher than the corresponding figure in 2022. The increase in processing is explained by the recovery work of enterprises after the vacation period.

At the same time, stocks of soybeans in the People's Republic of China decreased by 16% for the week and amounted to 4 million tons as of October 25 (-14% for the month, +21% for the year). The import of soybeans from Brazil in September amounted to 6.88 million tons, which is 23.4% higher than in September 2022.

Sales of soybean meal in the country were very low in September, which is due to the accumulation of large reserves of meal by feed producers against the background of a possible disruption of supplies.

During the last week, sales of soybean meal on the domestic market of the PRC increased, primarily forward, for delivery in May - September, which confirms the expectations of processors for a further decrease in meal prices.

According to Agricensus, there is information about Chinese buyers canceling purchases of 8-10 batches of Brazilian soybeans for delivery in November. "Margins for soybean processing in Brazil are higher than in China, so large corporations that have processing plants in several countries can choose where to process soybeans for higher profits," Chinese traders say.

Prices for Brazilian soybeans delivered CFR to China in November are only $0.05-0.15/bushel higher than US soybeans, although the premium is usually $0.5-0.7/bushel ($20-25/t ). Therefore, it is unlikely that the cancellation of soybean purchases in Brazil is related to the signing of the agreement on intentions to purchase soybeans in the USA.

At the same time, the demand for soybeans reduces the fall in prices and the demand for pork due to a decrease in the incomes of citizens. In September, pork prices in China fell to $2.96/kg (-32% year-on-year), although the biggest consumption of meat usually occurs during the autumn holidays.

Chinese livestock farmers are reducing the content of soybean meal in feed in order to make products cheaper, which reduces the demand for soybeans. The country's Ministry of Agriculture has already warned pig farmers about the second wave of falling demand for pork in February, after the celebration of the New Year 2024.