FACTBOX: China's bean buyers may face ECSA supply risks in coming months

China is slowly recovering from the coronavirus pandemic and soybean consumption at local crushing mills is rising as crushing margins improve. But imported soybean stocks at Chinese mills in coastal regions remain below last year's level.

Analysts say any major disruption at ports in South America, a major soybean supplier to China, from tighter measures to control the coronavirus pandemic could increase supply chain risks for Chinese buyers in the coming months.

Though Brazil and Argentina have so far said port operations remain normal, Chinese traders are concerned about logistical issues in South America, as it now takes longer to transport and load due to quarantine measures employed by authorities for port operations.

Sources said Chinese buyers have already bought five nearby soybean shipments from the US Pacific North West (PNW), paying premium prices over Brazil. This move was to make up front-month supply gap.

Traders in Argentina currently are not involved in big commitments to China, with most of the soybean sales to be shipped in May, an Argentina-based source said.

The coronavirus pandemic has accelerated in the US, but no port disruptions have been seen so far, according to sources.

"I don't see the [supply chain] risks in the US," said Pete Meyer, head of grains and oilseeds analytics at Platts Analytics. "I do see some problems, maybe not in the coming days, but probably in coming months, and the problems could start with a Brazilian port [if] somebody gets infected, and I do see supply chain risks there," he added.

Trade flows

*China shipped in 5.2 million mt of soybeans from Brazil in the first two months of 2020, down 26% on the same period last year, according to Chinese customs data.

*China ramped up imports of US beans in the first two months of 2020 six-fold from last year to 6 million mt, Chinese customs data shows.

*Brazil's shipments of beans in March are estimated at 10.5 million mt, according to the country's national agriculture agency Conab.

*According to data from Beijing-based Cofeed, at least 2 million mt of Brazilian soybeans arrived at Chinese ports in March.

*About six soybean cargoes totaling 394,000 mt heading to China were delayed in March, with the delivery spilling over to April, data from Cofeed shows. Three of the cargoes were from Brazil.

*At least 4.7 million mt of soybeans are lined up at Brazilian ports for shipment to China in April, according to data from Williams shipping agency. Brazil shipped 5.8 million mt of beans to China in April 2019.

*As of March 19, cumulative exports of US soybeans to China in the 2019-20 marketing year (September-August) had reached 12.1 million mt, up 159% from the same period a year ago, according to USDA data.

*Currently, total nominated vessels in lineups at Argentinian ports for April are 3.3 million mt of corn and 1.7 million mt of soymeal, an Argentina-based source said.

Infrastructure

*All the ports in Brazil have adopted strict measures as part of the government's direction to control the coronavirus pandemic. Most ports are operating normally, but some are working with reduced staff, according to sources.

*There are reports of ongoing labor union frictions with port authorities in South America, where unions are demanding two-week port shutdowns.

*As of week ending March 27, imported soybean stocks at Chinese mills in coastal regions were seen at 2.5 million mt, down 29.4% from 3.5 million mt in the same period a year ago, according to data from Cofeed.

*The total number of trucks entering Argentinian ports carrying soybeans on March 30 was 33.7% lower from the same day last year, according to data from Argentina-based Agroentregas SA.

*As truck arrivals in Argentinian ports are low due to restrictions imposed in productive areas, it is affecting mainly corn, as well as soy crush, a source said.

*Since the quarantine was first announced in Argentina on March 20 through March 31, approximately 871,000 mt of soybeans was unloaded from the trucks, down 29% from last year levels, Agroentregas SA said.

Prices

*Crushing margins in China for imported US soybeans at five important regions in the country were still lower than margins for Brazilian and Argentinian imported beans, according to Cofeed data.

*Crushing margin estimates for US PNW soybeans (May shipments) were seen at an average of Yuan 367.2/mt, compared with Brazil (April shipments) at Yuan 514/mt, and Argentina (May shipments) at Yuan 418.2/mt, according to Cofeed.

*According to S&P Global Platts data, the SOYBEX CFR China fell to $372.67/mt in February from $375.15/mt in January, but regained a bit, reaching $374.51/mt in March.

*The Platts assessed SOYBEX FOB Santos for May loading has risen 2.5% from January levels, to $349.45/mt in March.

*The price for SOYBEX FOB New Orleans is up 3.2% from January, reaching $353.84/mt, according to Platts data.

*Grain freight rates from Brazil to China for a 60,000 mt cargo stood at $22.25/mt on March 31, down 16.9% from January, Platts data showed.

*A 66,000 mt grain cargo shipping from the US to China was seen at $33/mt on March 31, down 9% from January levels, according to Platts data.