China's record pace of soyabean imports is running out of steam, in what is likely to be a blow to US exporters that normally ship 40 percent of their annual soyabean crop to the world's top buyer over the October-to-December period. Already off highs seen in July, China's monthly arrivals are set to drop further as negative crush margins force domestic oilseed millers to tighten their purse strings.
Making matters worse for US exporters is the availability of ample cheap Latin American supplies this year that has driven down benchmark Chicago prices to six-year lows. "What we saw in July is over," said one Singapore-based trading manager at an international trading company, referring to Chinese purchases. "In the fourth quarter, we will just about match last year's imports." It has been a year of stellar Chinese soyabean imports so far, soaring 9.8 percent to a record of 52.39 million in the first eight months. But with domestic stocks at one-year highs and crushing margins in the negative territory this month - the longest such stretch in a year - arrivals are set to dwindle.
China's purchases will reach around 18 million tonnes in the last quarter, traders said, implying a monthly average below August's 7.78 million tonnes and July's 9.5 million tonnes. Crushers have covered just about six million tonnes of purchases for October-December, around half of what is usually booked by this time of the year, with many switching to hand-to-mouth purchases from long-term deals, they added.
"Look at the Brazilian price, it is cheaper than the US cargoes," said a second Singapore-based trader. "It is better to buy what you need now as there are plenty of beans around." Brazilian beans to China were being quoted at $375 a tonne, including cost and freight, for February-March arrival, versus US beans being offered at around $400. This explains why the US marketing season has started at its slowest pace in at least five years. Year-end sales to China bring in about $9 billion, or about two-thirds of the revenue the United States gets from soyabean exports annually.
"US soyabean sales will pick up only gradually. Sales this year have been hurt by an extended South American marketing season. Crushing margin for US soyabeans are still negative while the yuan depreciation has raised import costs," said Monica Tu, an analyst with widely tracked consultancy Shanghai JC Intelligence Co Ltd. Soyabean processing margins in Dalian turned negative on August 11, the day China devalued the yuan, retreating from the profitable levels they held since December. Oilseed crushers now incur losses of around 50 yuan a tonne, versus around a 100 yuan profit before the devaluation.