China Agriculture View

In recent weeks,  China has set record for soybean imports, even eclipsing last year’s strong position.Chinese crushers have found it more profitable to import soybeans, rather than turn to government auctions, which have drawn scant interest. However, imports are expected to slow, if only because near-term demand is satiated.

But with generally favorable weather conditions in the northern hemisphere and firming US bean yield estimates what’s the rush? At the beginning of August 66% of the US’s soybean crop was rated as in good to excellent condition, although crop progress is currently slow with only 72% of pods setting compared to 85% for the five year average.

The USDA’s most recent report forecasts a lift in 09/10 oilseed end stocks, and even though this forecast is heavily reliant on South America’s production returning to normal, sharply higher production is expected based on large US bean plantings. Large South American production levels are possibly due to low wheat plantings, but production and availability of soybeans out of this region remains politically sensitive.

The Chinese government is holding another auction for 500,000 MT of soybeans today, and reports are that the Chinese government is considering a 200 yuan/t ($A35.42) subsidy to soybean crushers to encourage them to purchase government stocks. Possible answers to China’s current soybean purchases include high consumer demand, high crush margins on imported beans or a desire to control internal prices. But they could also be related to a genuine worry of future supply levels given solid demand, potential damage from a late nth hemisphere frost and unstable supplies out of Argentina.