China soybean buying picks up after fall in CME futures, slow farmer selling

China’s soybean buying has picked up in the last couple of days, as a fall in CME soybean futures made purchases more attractive for private crushers, while farmers in Brazil were said to be holding off on selling due to lingering concerns about damage to the crop following the recent heatwave, according to market sources.

Sources reported at least twelve or more cargoes of new crop soybeans from Brazil were sold Wednesday through to Friday, with the premiums paid increasing steadily.

February trades for delivered CFR volumes were heard at a 130-135 c/bu premium to March CME soybean futures, and maybe as high as 137 and 138 c/bu over March CME soybean futures.

March loading sales were heard at 53, 55, 60 and 70 c/bu, up from 48 c/bu heard paid earlier in the week.

A February-March cargo was meanwhile heard traded at a 97-100 c/bu premium, up from 75 c/bu a day or two ago.

CME soybean futures, against which most physical cargo sales are priced, have fallen sharply in the last few days on wet weather in Brazil, which is expected to bring some relief to the soybean crop after recent hot, dry weather, as well as favorable weather in Argentina.

“Wide and choppy trading ranges were seen for the US soybean complex today, mainly on positioning ahead of the weekend after grinding sharply lower during the morning because of improving Brazilian weather forecasts,” Terry Reilly, Senior Agricultural Strategist at Marex said in his evening report Thursday. 

“Soybeans, soybean meal and soybean oil all ended lower.”

A Brazilian analyst meanwhile said slow farmer selling may have contributed to the higher premiums.

“I think it is also because of a lack of farmer selling and concern about the crop failure up north,” Eduardo Vanin, lead soybean analyst at Brazilian brokerage Agrinvest told Agricensus.

“Besides that, Brazilian soybeans for February and March seem too cheap compared to the US.”

The move has also affected FOB premiums in the Brazilian Paranagua paper market, with a surge in the new crop levels.

Premiums for February shipment surged 30 c/bu to a 25 c/bu discount to March CME futures Thursday, while March followed the same path rising 28 c/bu to a 52 c/bu discount.

Trades were also heard for March loading at a 60 c/bu and 55 c/bu discount to futures, with unconfirmed rumors of further trades at a 50 c/bu and 45 c/bu discount to March futures.

Market sources said the sharp fall in CME futures had indeed played a role in the basis rise, but analysts are also becoming skeptical about the size of the crop Brazil will end up with, leaving fewer volumes to be traded.

One analyst said that it expected the country’s production to reach 162 million mt, but that it might be revised lower due to the drought stress in the central-west and excessive moisture in the south, even with better weather conditions forecast in the short term.