Soyabean supply at Chinese ports has hit a record high this month, a possible sign that crushers purposely loaded up on the Brazilian product in fear that soured US-China trade relations would ultimately make beans harder to obtain. For the soyabean market, the conflict came to a head late last week as Beijing slapped a 25 percent tariff on US soyabeans into China that will take effect on July 6.
But China's primary soyabean supplier, Brazil, is having some logistical issues stemming from last month's trucker strike that may temporarily curb China's bean intake - inconvenient timing for the world's largest soyabean buyer. Data from Thomson Reuters shows that soyabean stocks at China's ports hit 7.83 million tonnes this week, the largest in records dating back at least eight years. This is up nearly 19 percent from year-ago and tops the all-time high of 7.5 million tonnes set in early August 2017.
Sky-high soyabean stocks are not necessarily surprising given that China's demand grows to a new record each year. But the quantity and timing are slightly unusual. The mid-June spike in port stocks is somewhat premature as in the past, annual supply typically peaked around August. And the latest data through June 20 implies Chinese ports have roughly 3.5 weeks of supply compared with about 3.2 weeks on the same dates in 2016 and 2017.
Chinese crush margins were driving lower and/or negative during the time these cargoes were likely booked and shipped, which may also support the theory that buyers may be stockpiling ahead of US tariffs. Brazil is China's main soyabean supplier between April and September, and the United States takes over during the other six months. Brazil harvested a record crop earlier this year, and nearly all those beans will be accounted for between domestic crush and exports.
Tariff implementation is still two weeks away, but China does not typically ramp up purchases of US beans again until late July or August, so any impacts of the tariffs on Chinese bookings, and eventually its supply, may not be immediately clear. Brazil is still dealing with the fallout from the 11-day trucker strike at the end of last month, which is said to have caused export delays affecting 6.8 million tonnes of soyabeans and soyabean meal.
But Brazil's May exports were an all-time monthly record by a wide margin, despite the conflict that began on May 21, and most of that supply presumably went to China. Weekly data from Brazil's ministry implies that without delays from the trucker protests, May soyabean exports might have been up to 11 percent higher.
That same data shows Brazil's current month exports at 5.66 million tonnes through June 15. Assuming the same loading pace during the second half of the month would place total June shipments at 10.8 million tonnes, a new record for the month.
Such elevated export numbers may not have been expected given the chaotic aftermath of the trucker strike on the agriculture industry. Uncertainty over freight rates has been a huge hindrance to both buyers and sellers in Brazil, slowing the movement of product. The freight costs and lower benchmark soya prices in Chicago are also sidelining Brazilian farmer sales.
Ports are also dealing with traffic jams. A week ago, Reuters reported the number of ships waiting to berth and load soyabeans and products at Brazilian ports was nearly 60 percent larger than the same period in 2017. Additionally, the number of ships berthed and loading last week was 42 percent smaller than during the same time last year.
It is unclear whether Brazil's lofty soya shipments reflect that without the strike impact, the potential could be much greater than the numbers show, or if a delayed response to the logistical fallout will eventually manifest in Brazil's export or China's stock data. But the fact that Brazil is setting export records despite the operational woes is good news for Chinese importers, for now.
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