China's overseas sales of soyameal, which doubled in the first half of this year, are likely to take a hit as improving soyabean processing margins and higher demand for animal feed at home leave less supplies available for exports. Lower Chinese volumes will allow traditional exporters such as Argentina and Brazil to regain their market share, while also supporting global soyameal prices that have come under pressure in an amply-supplied world market.
"I think China has seen the best in terms of soyameal exports," said one Singapore-based trading manager with an international trading company that sells beans to China. "We expect exports to start declining from next month." In the first half of 2014, China's exports of soyameal - a protein-rich product used to fatten animals - doubled from a year ago to 1.36 million tonnes, led by a more than four-fold jump in shipments in May, according to Chinese customs data.
Japan, South Korea, Vietnam, Indonesia and Malaysia accounted for most of the purchases although some cargoes went as far as Europe. The jump in soyameal exports was due to a combination of factors - high imports of soyabeans by China at a time when domestic demand for the animal feed was weak. China, which buys nearly 70 percent of soyabeans traded in the world, has been bringing in record volumes of the oilseed in recent months. Soyabean arrivals rose 24.4 percent to 34.2 million tonnes in the first half of the year.
Domestic meal demand at the time fell on slowing economic growth and lower meat consumption following an outbreak of the bird flu virus, leaving huge surplus in the hands of processors. But these fundamentals are now changing, traders said. Soyabean processing margins have started improving with some crushers making a profit of up to $10 a tonne as compared to a loss of $80 a tonne factories suffered earlier this year.
Crushing margins are expected to pick up slightly later, in the third quarter of this year, on a seasonal pick up in demand amid extended public holidays and a recent drop in soyabean prices, said analysts in China. "We saw bulk cargoes trade into Southeast Asia when the Chinese soyabean meal was one of the cheapest but now shipments from Argentina are more competitive," said a second trader in Singapore.
Last week, a Thai feed miller bought 150,000 tonnes of soyabean meal from South America for about $500 to $505 a tonne, including cost and freight (C&F), for shipment between December and February, trade sources said. This compares with Chinese soyameal being offered around $570 a tonne, C&F, into Southeast Asia, traders said. Indian soyameal for nearby shipment is quoted at $610 a tonne, free on board.
The benchmark Chicago soyameal has given up more than a fifth of its value over three months while oilseed prices have also dropped by about as much. Further losses are likely as an expected record US soyabean output adds to a bumper South American production seen earlier this year. China's Dalian soyameal has shed just about 8 percent over the period. Given the competitive prices, for the next two months Brazil and Argentina will dominate meal supplies to Asia - which annually imports around 18 million tonnes a year or 30 percent of the global trade - after which US supplies will hit the market, traders estimated. China, however, will continue to supply meal to Japan because of logistical advantages, they added.