By Hallie Gu and Gavin Maguire
BEIJING/SINGAPORE, Aug 10 – Chinese importers will crank up their purchases of soybeans from the United States in the fourth quarter to meet healthy livestock demand, making the most of the start of the U.S. harvest season after existing Brazilian supply mostly dried up.
China, the world’s top soybean buyer, is expected to bring in about 8 million tonnes of the oilseed per month on average between October and December, mostly from the United States, four traders and crushers said on condition of anonymity.
It comes as China is falling well short of ambitious targets for the purchase of American goods set out as part of a Phase 1 trade deal with the United States in January.
“We’re happy to buy large volumes of U.S. soybeans in the fourth quarter, as crush margins are great,” said a China-based trader with a major trading house.
“Demand is much better than expected, no matter from pigs or poultry.”
China has stepped up imports of U.S. farm goods, including beans, in recent weeks as it tries to fulfil its pledge under the Phase 1 deal. But traders and analysts say it would need “explosive” buying to meet the target.
The purchases would be driven by commercial interests, traders said.
“Not many people care much about the Phase 1 trade deal now, because crush margins (for U.S. beans) are great and there is not much Brazilian old crop left in the fourth quarter. We’ll buy anyways,” said a source with a major crusher.
Crush margins in eastern China’s Shandong province, a major hub for soybean processing, were about 289 yuan ($41.48) a tonne <JCI-SBMG-SHDNI> on Friday. That was not too far from levels of 367 yuan a tonne hit in July, the highest in more than three months.
Traders had worried record Brazilian shipments would lead to bulging inventories and dampen crush margins.
But high stocks are being digested quickly by the poultry sector, which expanded as consumers sought alternatives to pork after the African swine fever outbreaks decimated the country’s pig herd, and thanks to a recovery in pig production after the deadly disease.
U.S. soybean imports could come in even higher given that some importers are waiting for U.S. prices to soften during the harvest before locking in purchases, traders said.
Meanwhile, state firms could be mandated to buy more as China seeks to build up state stockpiles to protect against disruptions from the coronavirus pandemic.
“We’re still quite open for November and December and can buy as many U.S. soybeans as we can digest as demand is very good,” said the source with the major crusher. ($1 = 6.9665 Chinese yuan renminbi)
(Reporting by Hallie Gu in Beijing, and Gavin Maguire in Singapore; Editing by Ana Nicolaci da Costa)