Rumors spread of Chinese crushers washing out Brazilian bean sales

26 Oct 2023 | Jane Li, Eduardo Tinti

As many as eight to 10 cargoes of Brazilian beans for November shipment to China may have been “washed out” – an industry term colloquially used when deals are canceled or contracts breached – by some major global grain firms, several market sources told Agricensus on Thursday.

While the washouts could not be fully confirmed yet, the rumor spread widely on Thursday, with sources believing there were three firms to have taken the move.

Meanwhile, some other market participants were skeptical about the information, saying they had not heard anything of these washouts.

The washout rumor came as Brazilian beans on a CFR China basis for November shipment have been slightly less competitive than sales out of the US Gulf, with the former seeing assessment at around a 5-15 c/bu premium more than the latter this week.

“Crush margins in Brazil seem to be better than in China, which means big corporations that have crushing plants in multiple countries can choose where to crush the beans to get better profits,” said a Chinese trader.

“The washouts might be accepted by exporters as it is currently more attractive to crush beans in Brazil and sell products rather than originate and export,” said another Brazil-based source.

Sources believe drivers for the washouts also include an attempt by China’s hog producers to cover their losses by reducing the percentage of soymeal, one of the major products of soybean crushers, in feed, as well as potential logistics issues that could slow down the pace of loading for Brazilian beans to China.

China’s hog prices have been largely on a downward trend this year partly due to a higher-than-usual sow count, according to China’s Ministry of Agriculture and Rural Affairs, which has warned pig farmers about potential heavier losses after the Lunar New Year 2024 that falls in February.

"I was talking to a local crusher in China. The trader told me he is thinking about washing out too,” said the Brazil-based source.

"[It is] too hard to sell soymeal locally.

Soymeal sales in China were unusually sluggish in September, a situation many believed was due to stock building of the product by feed producers in previous weeks for fear of tight supplies.

Since then, several days recently have seen large volumes of trade in China's domestic soymeal market, mostly for forward sales, including 1.14 million mt traded on Wednesday for May to September, according to sources. 

Brazil dominated China's soybean imports in September with 6.88 million mt of products sold to China, which was 23.4% higher than a year ago.