Chinese soybean import prices hit fresh record low as demand plummets

CFR China soybean prices hit a fresh record low Tuesday of $350.44/mt as global demand has plummeted as a result of the coronavirus pandemic.

This is the lowest price since S&P Global Platts began assessing this market in July 2018.

The previous record low was $354.94/mt in May 2019, when US soybean sales to China were disrupted by escalating trade tensions between the US and China.

As a result of the prolonged period of lockdown in an effort to contain the spread of coronavirus, global soybeans prices have been significantly depressed due to weakening soybean demand from industries such as diary, poultry and pork processing in most countries.

In addition, low US soybean sales to China added downward pressure to soybean futures on the Chicago Board of Trade. According to USDA data, US soybean sales to China in the 2019/20 marketing year as of April 16 totaled 12.62 million mt, lower year on year. The figures came in below the expectations of market participants, since China had pledged to purchase large volumes of US agricultural products when the US and China signed the Phase 1 trade deal on January 15.

At the same time, Brazilian soybeans basis has been constantly influenced by Chinese purchases of US soybeans since the start of trade tensions between China and the US. On April 21, Brazilian soybeans basis offers dropped 5-10 cents/bu due to a sudden purchase of US soybeans by a Chinese state-owned agriculture company. At the same time, news of potential purchases of US soybeans to fulfil an additional 10 million of national soybean reserves continued dampening the Brazilian soybeans basis. Brazilian soybeans CFR China M1 basis was assessed at 120 cents/bu on Monday, down from 136 cents/bu a week earlier. When trade tensions between the US and China emerged, Brazilian soybeans basis "became more news-sensitive to all types of political dynamics between the US and China," a trader said.

Chinese soybean demand has strengthened more recently, with buyers increasing soybean imports from Brazil, driven by the record low prices. "The Chinese soybean crush margin outperformed other countries and regions where soybeans demand was hampered by coronavirus," a crusher said. "China is the first country to recover from coronavirus and has better virus control measures to ensure normal operation of the soybean industry."

A buyer said that Chinese soybean imports are likely to increase significantly in the current 2019/20 marketing year.

Several soybean crushers predicted that total Chinese soybean imports would reach 91 million-92 million mt this year, as buyers buy Brazilian soybeans further out, while two large crushers said they had more optimistic expectations on soybeans imports at around 94 million-95 million mt.

The USDA in April raised its estimate for Chinese soybean imports to 89 million mt from 88 million mt in March.