Light Chinese soy imports should raise eyebrows: Braun
(The opinions expressed here are those of the author, a market analyst for Reuters.)
NAPERVILLE, ILLINOIS - China's soybean imports recently dipped to a 12-year low, and trade estimates suggest the overall intake pace could still be sluggish by mid-year.
But top supplier Brazil has harvested a record crop and its latest export volumes to China have hit all-time highs.
So how does this all fit together?
For one, soybean import data from Chinese customs has not recently aligned with supplier export data, so much so that the U.S. Department of Agriculture last year stopped using China's customs data for its estimates.
And in a slightly satisfying twist for U.S. soybean exporters, Chinese buyers may have been able to use a few extra U.S. bean cargoes several months back during the peak U.S. shipping season.
But that might not be the case this time around.
SCENARIO RUNDOWN
China's customs reported March-April soybean imports at just 9.6 million metric tons, down 32% on the year and the smallest for the period since 2013.
That held China's total imports through the first seven months of 2024-25 to a six-year low.
The laggard pace owes partially to extended clearance times at customs, something not necessarily new to Chinese importers. Brazil also recently reaped a record soybean crop, but harvest delays and logistical issues slowed the export ramp-up that typically begins in February.
Brazil's February-April shipments to China still notched an all-time high, some 13% more than the year-ago record.
But since the start of the U.S. marketing year in September, U.S. bean exports to China are at a 12-year low aside from the two previous trade war years. Additionally, Brazilian volumes to China between September and January were down nearly 40% on the year.
This might explain some of the shockingly low Chinese import numbers, which have strained domestic processing and tightened soymeal supplies. Perhaps Chinese buyers were too lax in the anticipation of Brazil's monster crop, and some additional U.S. purchases might have filled some gaps.
Given the trade data discrepancies, though, analysts should monitor the monthly Chinese customs numbers to ensure the recent record shipments are actually showing up in the data.
CLASHING FORECASTS Analysts peg China's May and June soybean imports to reach roughly 11 million tons apiece to ink a new record for the period, up 3% versus last year.
But that would still keep year-to-date imports at six-year lows with just three months left in the marketing year. This is somewhat peculiar as China accounts for more than 70% of Brazil's soybean exports, which are expected at all-time highs this year.
Record Brazilian exports could indeed blow China's forecast, especially because Brazil's late start plus a possible May slowdown mean that elevated export volumes could persist well through mid-year.
This week, China boosted its 2024-25 soy import estimate to 98.6 million tons from 94.6 million previously.
The new 2024-25 outlook would allow China's July-September imports to fall 9% from the year-ago record if assuming the analyst estimates for May and June. That doesn't exactly fit with the meaty Brazilian export narrative.
USDA estimates China's 2024-25 imports at 108 million tons, down from 112 million in the previous year. The agency has maintained import figures above the official Chinese ones for a couple years now as exporter data suggests China's figures are too low.
And they have indeed been too low, evidenced by the bump in China's 2024-25 import target, which was first issued a year ago. The estimate might still be light as China's import numbers for the last two seasons rose even further from this point, the 2023-24 figure by another 9%.
But here's where the news might turn grim for U.S. soybean exporters.
Brazil's late start to shipping means that elevated volumes could extend into September or October, when the U.S. soy season usually starts to build. This phenomenon has cut into U.S. export potential in past years.
That situation could be optimal for China in its effort to reduce reliance on American soybeans, potentially offering Beijing leverage in the trade war with Washington.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
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