Chinese soybean basis to CBOT turns negative, improves crush margins

Chinese soybean prices have continued to decline, with the basis to Chicago Board of Trade futures turning negative after reaching the 0 cent/bushel mark April 11. This came amid falling FOB premiums in Brazil due to a faster progression of harvest and farmer sales that have lagged behind the previous year by 30%.

Platts assessed the soybean CFR China M1 basis at minus 10 cents/bushel over May (K) contract on CBOT April 11, the lowest ever for a front-month Brazil shipment, S&P Global Commodity Insights data showed. The soybean CFR China M1 flat price was assessed at $547.30/mt April 11, down 5.2% week on week, S&P Global data showed.

During the day, one of China's state-owned crushers continued to check prices for nearby shipments and the buying indications fell from minus 10 cents/bu over May (K) to minus 15 cents/bu over May (K), sources said. Many crushers said they expect the prices to continue to fall tonight.

"With falling basis levels, the replacement crush margin has improved from negative to $9-$10/mt for May shipment amid higher soybean meal and oil prices on the Dalian Commodity Exchange (DCE)," one of the largest crushers said. This meant that there was higher buying interest for May shipment from commercial crushers.

Another Chinese broker also said that the average replacement crush margin for April-May shipment could reach $6-$7/mt, attracting more buying interests from crushers to continue covering demand for nearby shipments.

"More purchasing and demand coverage is expected from China this week if prices continue to fall, however, the market will only react after the release of USDA´s World Agricultural Supply and Demand Estimates, or WASDE, report April 11," a China-based trader said.

Platts assessed China's soybean gross crush margin at $13.07/mt April 11, up $7.59/mt on the day, S&P Global data showed.