China soybean prices continue to hit new highs amid surging freight costs

The soybean outright price for CFR China first-month assessment has reached new highs, at $757.93/mt as assessed by S&P Global Platts March 8, up by 3% week on week, and up by 10% month on month. The higher price is fueled by surging freight costs and low availability of offers, according to market sources.

Last week, China has bought 55-60 cargoes for both nearby and deferred shipments. More than 60% of total trades were done by China state-owned importers. CFR China basis were set on rally mode after the active demand coverage by Chinese buyers, further pushing up soybean flat prices amid raising Chicago Board of Trade futures.

With higher price levels, the open demand projection for April shipment has been reduced by industry sources from 9.5 million mt to 9 million mt, down by 5% week on week.

According to market sources, as of March 7, some 59% of the open demands for the April shipment had been covered, up 15% week on week. By this time of last year, demand for shipment a month ahead had already been covered by 100%. Some 33% of the open demand for the May shipment had been covered, up by 9% week on week. For October and November shipments, 18% and 35% of the open demands had been covered.

The active buying activity in last week also pushed up the freight rates.

"The freight market becomes tighter after 55-60 cargoes being booked by China," a Chinese trader said.

Meanwhile, skyrocketing oil prices have also driven up freight prices.

"Freight sellers are unable to hedge against their short positions if they sell the freights to trading houses, hence, there are no freight offers from them on last Friday and yesterday," said another Chinese trader, adding that there were few offers for nearby shipments due to the uncertainty on freight costs overnight.

The freight rate on the route from Brazil to North China for April shipment is at $75/mt, up by $10/mt week on week.

Buyers are not willing to follow the high prices. The bids are still around previously traded level at 355-360 cents/bu over May(K), while the offer prices are 30 cents/bu higher, resulting in a lower liquidity in the market.

"With uncertain upside of soybean prices and deteriorating crush margins, buyers are unable to finish covering all the open demand for April shipment by the end of March," a Chinese crusher said.

China has yet to provide details about the volume and timing of releasing soybean state reserves.