China refuses to export soybeans from Brazil due to a sharp increase in export prices

Some Chinese processors have started withdrawing from contracts to buy soybeans from Brazil after their processing became unprofitable due to a sharp increase in export prices in Brazil, which is the main supplier of soybeans to China.

Since last week, 10 shipments of Brazilian soybeans have been canceled as part of the so-called "washout", when physical delivery under a contract cannot be carried out without confirmation from the seller and buyer.

China took this step after reducing the soybean processing margin to negative values due to a sharp increase in prices in Brazil due to the drought, which significantly reduced the soybean harvest of the world's largest producer.

Several weeks of dry weather significantly worsened the prospects for the soybean harvest in Brazil, so analysts were repeatedly forced to lower their estimates of the harvest, which, according to preliminary forecasts, was supposed to be a record.

Importers have stepped up purchases of soybeans in the United States. The pace of soybean exports from the United States has increased at a time when the market is usually dominated by Brazilian soybeans. Soybean futures at Benchmark Chicago nearly hit an 8-month high.

Losses of Chinese processors now amount to about 2 20 per ton of imported soybeans. Therefore, buyers are likely to cancel all import deliveries soon.

China, the world's largest importer of soybeans, is very sensitive to inflationary pressures caused by a sharp increase in oilseed prices. It has the world's largest pig industry, which is highly dependent on imported soybeans, from which the processing industry produces flour for feeding pigs and cooking fat.

The reduction in prices for live pigs by almost half over the past year has forced the authorities to step up the purchase of pork to replenish state reserves.