CORRECTED: China sees greater competition for Brazil soybeans as prices slump

5 Dec 2018 | Andy Allan

Chinese crushers are for the first time in months seeing serious competition to buy Brazilian soybeans after an 11% price slump in the cost of Brazilian beans has made shipments for March cheaper than any other supplier, according to sources and Agricensus data.

Last week Japanese buyers were heard to have purchased two cargoes of Brazilian soybeans and this week one cargo was rumoured to have been sold to Taiwan, as freight- and quality-adjusted prices for new crop soybeans from Brazil loading in March onwards are now below US values.

“Seems from March onwards, Brazil is cheaper than the US, so Thailand, Taiwan, Japan and Mexico are all making enquiries,” said one market source.

Other market sources confirmed that Taiwan was looking to issue a tender to buy soybeans.

According to Agricensus data the spread between soybean cargoes loading in Santos and the US Gulf on an FOB basis in March has fallen to just 29 cents per bushel ($10.65/mt) from almost 80 cents per bushel ($29.40/mt) just two weeks ago.

Once additional freight to Asia of about $4/mt and a protein premium of around $7/mt is taken into account, buyers predominantly in Asia are looking at Brazilian origin for soybeans.

The figures show a similar pattern for April, May and June.

Record crop

With the US starting at a record crop of 125 million mt, news that non-Chinese buyers are looking at buying Brazilian beans instead of US supply will hurt US farmers who had been hoping to mop up non-Chinese demand.

However, the prospect of a resolution to the trade war has seen Brazilian prices crash. This has been on the expectation that Chinese crushers would once again start to buy US soybeans – a dynamic that has yet to emerge.

On Monday, US Agriculture Secretary Sonny Perdue told reporters he expected to see Chinese buyers come back to the market for US beans in January.

However, Chinese demand for soybeans in the 2018/19 marketing year has been hit by an outbreak of African Swine Fever and a lower threshold for protein in pig feed. Demand is expected to be about 9 million mt, or 10%, lower than the previous marketing year.

To meet US exports forecasts of 51.71 million mt this year, US suppliers need to make net sales of 730,000 mt each week.

According to USDA data, they have only made that total three times in the first 13 weeks of the marketing year, which started in September.

In October, 95% of Brazil’s exports headed to China, according to government figures.

"This year we focused more than 90% of our volume to China, but next year we will need to open our minds [and] develop other destinations," said a third source.

The USDA will next week unveil its last forecast for agricultural supply and demand and a keenly-watched figure will be the US carryout stocks.

Corrects protein premium from $7/mt to $4/mt