Brazil's share of soyabean exports to China, the world's top buyer of the commodity, grew to the largest on record in 2017 and looks set to expand again this year, helped by competitive prices and the high protein content of its crops. That's another potential blow to rival exporter the United States as it grapples with tougher quality rules on its shipments to China from 2018, as well as with global markets flooded over the last few years by bumper supply of the oilseed.
China, which imports 60 percent of the soyabeans traded worldwide, bought 50.93 million tonnes from Brazil in 2017, accounting for 53.3 percent of total purchases, according to customs data released on Thursday. Chinese buyers mainly use soya to churn out cooking oil and ingredients for animal feed. US sales came in at 32.9 million tonnes, or 34.4 percent of China's imports, the exporter's lowest share since at least 2006.
"Soyabean imports from Brazil to China are expected to keep growing in the new year ... Brazilian beans will have an advantage in prices and protein (content)," said Tian Hao, senior analyst with First Futures in the Chinese city of Tianjin. Brazil took over from the United States in 2012 as the top supplier to China, with its exports often attractively priced as it relies on overseas markets for sales due to limited domestic demand and storage. Brazilian beans also boast higher protein levels than US supplies, making them more attractive for animal feed producers.
A weaker real also helped lure buyers in 2017. Brazilian soyabeans for March, including freight to China, are currently around $428 a tonne, compared to $433 a tonne for US supply, according to trader data. "From early May, we were mostly crushing Brazilian soyabeans," said a manager at a crushing plant in southern China, declining to be identified as he was not authorised to speak with media.
"Last year, about 65-70 percent of the beans we crushed were from Brazil." The United States is the world's biggest soyabean exporter after Brazil, with the two countries accounting for roughly 80 percent of global shipments, which are valued at around $50 billion annually.
Brazil's share of the export market is on track to keep growing in 2018 as it gears up for a crop of around 114 million tonnes, matching last year's all-time high production. Larger harvests mean Brazil's marketing season, which begins in May, has started to extend into October-November rather than ending around September as is traditional. That has eaten into the period when US supply has typically dominated markets.
"Soyabean inventories everywhere are so large that there is nothing like US marketing season or South American marketing season (any more)," said a veteran soyabean trader at one of China's state-run trading companies. "Brazil has started harvesting new-crop beans while it is still not done selling last year's crop."
And Brazil's slice of the Chinese market will likely get another boost in 2018 as restrictions imposed by Beijing on US shipments from January 1 bite. China introduced the stricter import standards, which have reduced the amount of foreign matter allowed in the most widely-traded soyabean variety to 1 percent from 2 percent previously, after raising concerns about weed seeds. "They are penalising US beans," said Roy Huckabay, an analyst with Linn & Associates, a futures brokerage in Chicago. Meanwhile, China's overall soya imports are seen climbing in 2018, boosted by growing demand from the nation's massive livestock herds.