China purchased 8.9 million mt of Brazilian soybeans in May, accounting for over 94% of its total monthly soy imports, while the US soybeans accounted for a dismal 5% share at 0.49 million mt, Chinese customs data showed June 25.
Between January 1 and May 31, Brazilian real depreciated over 35% against the dollar, which made its soybeans very price competitive against its main rival, the US, market sources said. The Chinese crushers cashed in on this opportunity and bought a bulk of Brazilian beans in this period, as a weak real supported farmer selling.
Brazilian soybeans exported 49 million mt between January and May, with over 73% of the shipment destined for China, Brazilian trade department report said on June 2.
China, the world’s largest soybean buyer, imported 9.4 million mt in May, up 27% year on year, and 33.9 million mt of beans between January- May, up 7% on the year, customs data showed June 7.
The Asian nation has ramped up soy purchases, anticipating future uncertainties amid the coronavirus pandemic and US-China tensions, a market source said.
Chinese crushers are also not willing to take supply-side risks in the coming months.
For August and September, its soy import coverage is estimated to be almost complete, a Chinese analyst said.
In fact, Chinese buyers are now mostly focused on booking October shipments.
In May, although Chinese commercial buyers continued to cover soy demand for July and August from Brazil due to its competitive prices compared to US origin, they also kept a close watch on Chinese state-owned buyers’ next movement on US soybeans, market sources said.
However, in June, market situation was expected to be starkly different and China could purchase for US soybeans.
A volatile Brazilian real has hit Brazilian soy’s price competitiveness.
Market participants said US soybeans have become more competitive due to dollar depreciation, as investors start to reinvest into equity markets amid growing optimism for global economic recovery on easing of lockdown.
The spread between US and Brazil soybean prices continued to narrow down, a Chinese trader said.
However, the Brazilian June export data tells a different story. Brazilian soy exports reached 9.6 million mt in the first three weeks of June, which has already surpassed June 2019 export volume of 9 million mt, foreign trade department data released June 22 showed.
Brazilian soybean exports in June could rise 43% on the year due to Chinese demand, which may comprise over 70% of total soy shipment, according to the market sources.
Based on the port lineups, Brazilian soybeans exports in June could be in the range of 12.5 million–13 million mt, an expected rise of up to 43% on the year, and likely to set a monthly record for June.
China’s state and private firms have continued to buy Brazilian soybeans in June as diplomatic relations with the US soured, an industry source said.
“Both state-owned and private Chinese soy buyers might continue to buy US soybeans for either national reserve purpose or commercial crush purpose, but the market uncertainty continues,” a Chinese crusher said.
US-China trade relationship seems to have hit turbulence recently due to cross-allegations on the coronavirus pandemic mismanagement, market sources said. The Phase 1 trade deal could be under pressure if pandemic-related diplomatic spats continue between Beijing and Washington.
Chinese soybeans buyers are expected to continue their pace of imports in the coming weeks to cover for market uncertainties, market sources said.