US soybean demand firm on Chinese state-owned companies' purchases: sources

New Delhi — Chinese state-owned companies continue buying US soybeans despite lower crush margins even as private buyers have stayed away from the market in recent days, trading sources told S&P Global Platts Sept. 24.

Chinese state-owned companies are keen to ramp up their soybean stocks amid robust domestic demand for soy-based animal feed, a crusher said.

US soybean prices have been trending higher since August amid strong demand from China and tightening supplies due to dry weather.

November soybean futures have been trading more than $10/bushel -- a two-year high on the Chicago Board of Trade.

So far in the 2020-21 marketing year that runs from September 2020 to August 2021, US soybean export sales are at 35.5 million mt as of Sept. 17, up 192% year on year, with majority of purchases done by China, the US Department of Agriculture's trade report said.

Beijing is committed to the Phase 1 trade deal signed on Jan. 15 with Washington, and has accelerated its soybean purchases from the US, a China-based agricultural consultancy said earlier.

Under the Phase 1 trade deal, China is expected to purchase more than 43 million mt of US beans in 2020, and the Asian country is seen to continue its strong buying trend in the last quarter, the consultancy added.

However, some agricultural analysts said high Chinese demand for pork is also driving up its soybean demand.

China is the world's largest consumer of meat products, particularly pork, and requires large volumes of soybean-based animal feed for the domestic pork industry, which was hit hard by the African swine fever epidemic for the last two years.

The country lost more than 50% of its swine population to the African swine fever epidemic, which started in August 2018. Following quarantine measures and the culling of more than 200 million pigs, the country's pig population has been on the path to recovery since late 2019.

The continuing recovery in China's swine and poultry production growth is expected to push up soybean demand in 2019-20 and 2020-21, market sources said.

China's pig herd increased by 31.3% year on year while sow herd numbers rose 37% on the year in August, according to the latest Agricultural Ministry of China report.

Boosted by a rising pig herd, China's soybean imports in the 2019-20 and 2020-21 marketing years, which run from October to September, are forecast to touch all-time highs of 98 million mt and 99 million mt, respectively, the USDA said in August.

TIGHT BRAZILIAN SUPPLY

China purchased the bulk of its soybean shipments from Brazil in earlier months, however, the Asian economy's focus is expected to shift toward US soybeans in coming weeks on tight Brazilian supplies.

Backed by a weak currency, Brazilian soybean sales to China in 2020 were reported at 55 million mt between January and August, up 26% on the year, Brazil's latest trade data showed.

The South American country has already sold more than 95% of its old soybean stocks, and is left with very little beans for exports, a China-based crusher said. "So, our attention has now shifted to the US beans," he added.

Steady Chinese demand continues to support port loading basis.

SOYBEX FOB New Orleans for November loading was assessed at $422.37/mt, up 14% month on month, S&P Global Platts data showed