Chinese Oct. crush margin using US soybeans nears positive territory

11 Sep 2018 | Andy Allan

Chinese crush margins using soybeans from the United States are on the cusp of turning positive for the first time since China implemented a 25% tax on importing them, according to Agricensus data, as a collapse in US export prices helps margins.

US cargoes out of the US Gulf were heard offered at 17 cents over futures on Monday afternoon and Agricensus marked valued at a 15-cent premium.

Buying US beans at that price for October loading over November futures and selling soymeal at CNY3,294/mt and soyoil at CNY5,840/mt on the Dalian futures exchange means crushers will be operating at a CNY9/mt ($1.30/mt) loss once VAT and rebates have been applied.

The figure, which is referred to as the replacement cost versus futures crush, is down from a loss of CNY400/mt ($58/mt) at the start of August.

However, while that figure may still be in the red, importing beans and selling on the cash market may already be profitable, according to some sources.

“US beans are now profitable for some crushers, depending on transport costs and local cash prices (for meal and oil),” one source said.

While the figures suggest a return to buying US beans could be on the cards, several crushers and importers told Agricensus last week that few companies would be willing to buy US shipments for fear of offending government policy.

And while October cargoes may be profitable, a steep carry to November for US beans means the crush spreads sink deeper into the red for November cargoes.

“There’s a lot of selling pressure this month and next,” said one US-based market source.

On Monday, CIF barge bids for September and the first half of October slipped into negative territory versus futures as the propsect of a huge harvest hitting the bins saw bids back away.

The lowest bid heard was at -5 versus futures, while the best bid was heard at just 3 cents.

Barges and cargoes typically trade at a premium to futures on the Chicago Board of Trade, as delivery costs are generally higher to deliver into the US Gulf rather than a CBOT-nominated warehouse.