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The demand is still there, but the delivery may be “hand to mouth.”

Naomi Blohm, senior market adviser

September 29, 2022

6 Min Read
China flag with soybeans

Some agricultural activities in China caught my attention over the past couple of weeks. Soybean demand is top of mind as harvest begins within China.

According to the most recent USDA report, China is expected to produce 18.4 million metric tons of soybeans this year. However, as most of you know, China imports the bulk of its soybean needs, to the tune of 97 million metric tons. Primarily the United States, Brazil and Argentina supply those needs.

This week it was announced that China would auction off 500,000 MT of imported soybeans from state-owned reserves on Sept. 30. This concept is not anything new as China has been steadily selling state-owned soybean stockpiles onto the domestic market on a regular basis since March. However, the timing is interesting to me.

Are they moving soybeans in storage to make room for their upcoming harvest, or are they moving soybeans out of end-user necessity? My hunch is that overall, China is potentially quite low on physical soybean supplies and has “held off selling” what they had in state-owned storage for as long as possible. Finally, now their end users have screamed, “Hurry up and release some beans!”

Chinese soymeal prices reach record high 

I say this theory because soymeal prices in China have recently been at record highs. China locked up a good portion of their population for as long as possible in the name of COVID (but if you know me, my thoughts are that it was also an effort to reduce food demand across the country as China could have been running low on food ahead of harvest). The Chinese end users made do with what was available amid lockdown situations.

Related:Brazil readies for historic soybean crop

Yet, according to social media stir, soybean meal spot prices in China recently hit their highest level at Yuan 5,500/mt on average Sept. 26, amid lower availability in the domestic market. The government needed to release those beans to help satisfy demand. According to Shanghai JC Intelligence Co Ltd (JCI), Chinese soymeal stocks have fallen for 10 consecutive weeks to 493,000 tonnes in the week ending Sept. 17, well below the five-year average of 845,000 tonnes.

Will China import more soybeans?

Also because of Covid lockdowns, recent soybean imports to China were slower than normal. Again, in my opinion, this was likely a sign of China trying to hold off purchases as long as possible ahead of U.S. harvest. Soybean imports for China during August were down 25% from a year earlier, and arrivals in the first eight months of 2022 were down 8.6%.

With the U.S. harvest not occurring early, and with U.S. yield results already coming in as poor, if not worse in some areas, my hunch is that China is attempting to “save face” and let the U.S. feel like maybe the Chinese don’t “need” as much of our U.S. grain, when in fact they still do.

Cue the fancy negotiations with Argentina to pry what those farmers had for beans out of their hands. Argentina farmers sold 12.8 million metric tons of soy since the currency devaluation, according to the Buenos Aires Grain Exchange. A large majority of those soybeans are headed to China.

The other thing that makes me chuckle is that recent headlines have suggested that China intends to essentially put their hog herds and aquaculture efforts on diets. They suggest they plan to use less soybean meal in the future. An interesting concept now that the hog herd has been rebuilt and they have the world’s largest aquaculture business.

While they may try feeding less or substituting a different grain, my hunch is that this is their response to the cat getting out of the bag that they were quite low on soybean meal supplies. They wanted to downplay the noise, especially ahead of the week-long Chinese holiday that begins Oct. 1 and the Chinese elections that are coming up in a few weeks.

Low global grain supplies

Now China likely waits a couple of weeks to hear how U.S. soybean harvest is going. If it is dramatically worse than expected, we will probably see China step up to the plate to increase U.S. soybean imports sooner than later.

After all, remember a large portion of the entire northern hemisphere suffered drought this summer. Europe is likely to be a larger than normal importer of soybeans and oilseed products as their production was lower and they are not able to rely on Ukraine imports like years past.

Fast forward a few months from now. What if that South American crop suffers again!? According to USDA, overall, Argentina is expected to grow 51 mmt of beans for 2022/23. Brazil has attempted to produce 150 MMT for two years and failed to do so. While the USDA on paper says global ending stocks for soybeans may be increasing, that’s betting on record South American production. Those bushels are not in the bin and South America weather will be paramount in the next four months.

With still historically high soybean prices, and a higher U.S. dollar, China may be cautious or slower to buy U.S. soybeans. But I don’t think they stop. Look for more “hand to mouth” type of small weekly sales that over time will add up to large sales.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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