Soy: What to expect from China? Continuous strong demand, including, for …

With China less present at the moment making new purchases of soybeans among its main suppliers – Brazil and the United States – the market wonders what to expect from demand at this time. Analysts and consultants have already said that the “brake on the moment” is, in fact, punctual and that the trend is for purchases to intensify again between the third and fourth quarters of the year to ensure their adequate supply.

The guarantee, however, also comes from another side, as explained Roberto Dumas Ladies, economist specializing in international economics and professor at Insper. “China continues to buy food (or raw material to produce it) to ensure that its population is well-fed and to avoid social tensions. Politics, food and society go hand in hand,” he says.

The government, according to Dumas, will not allow any failure in this sector, however small, “because it is a question of the party’s legitimacy”. And “information like this that we also have to reach rural producers”, adds the economist with extensive experience about the Asian nation.

And this continuity of purchases, even if not for soy at this time, is also due to other fundamental factors, such as new cases of African Swine Fever and other zoonoses that are being identified in China. The scenario has reduced the housing of breeding stock in the country, and has compromised the pace of planting recovery as was initially predicted after the more aggressive outbreak of PSA.

“According to surveys by the consultancy Yongyi, the pig breeding population in China recorded a 4.99% drop in January in the monthly comparison and a 4.68% drop in February, figures consistent with the movement of piglet prices (+ 30% ), meat (-22%) and soybean meal (-13%) in the Chinese market in the last two months. The consultancy has also observed a 25% reduction in the average weight of the carcasses to 90 kg “, informs the Agrinvest Commodities.

Even so, as I said exclusively to the Agricultural Newss o trader do Ramax Group, Gabriel de Freitas, which works in China, such conditions should not limit the country’s potential importer.

“It is difficult for the country to achieve the desired self-sufficiency for the production of pork, and it will never be well supplied in the short and medium term in the stock of soybeans and corn,” he says.

Review Gabriel de Freitas in full:

+ China continues with space for importing meats, soybeans and corn, says expert

And this is true even with a recent request from the Ministry of Agriculture and Rural Affairs of China to animal nutrition experts to look for feed formulations that use less corn and soybean meal.

For the current business year, the USDA (United States Department of Agriculture) estimates soy imports from China at 100 million tonnes, while market analysts and consultants expect more than that.

For corn, the department is already signaling an increase in its foreign sales to 67.3 million tons, mainly motivated by the continuity of Chinese demand for cereal. However, some factors could signal the non-repetition of imports from China at around 24 million tonnes, according to Agrinvest.

“China is making an internal effort to replace the use of corn,” explains the consultancy. The Asian country, in the accumulated of 12 months until February, already registers a record of import of other cereals that reaches 24.7% million tons, a volume that is 162% higher when compared to the previous year. At the same time, there is also the operation in the domestic market through auctions.

The movement also impacts the consumption of soybean meal. “The greater use of cereals with a higher percentage of protein is reducing the use of soybean meal. The proof of this comes through the greater use of soybean oil in diets due to the energy balance”, adds Agrinvest.

So, with the latent need, what to expect from China when it comes to demand for grains? Notícias Agrícola consulted some market analysts to arrive at a common denominator, always taking into account that the demand of the largest global consumer of agricultural commodities and food in general is still very strong, growing, and fundamental for the good political progress and economic performance of the nation.

Matheus Pereira, Director of the Agribusiness Homeland

“We live in a seasonal moment, where we hit the buying spikes between March and May, probably with the biggest peaks in April. We are now passing the peak of Brazilian soy exports, with the highest volume going to China. We have to remember that, in 2021 alone, more than 15 million were shipped to China, which remains the largest buyer, the main one, nothing changes, but every day that we approach the turn of the year (commercial) there is a cooling of the Chinese demand for soybeans Brazilian market, turning to the North American product “, he says.

Currently, Brazilian oilseeds are still the cheapest in the world for short-term shipping, with demand still concentrated here in Brazil. The scenario starts to change from July, August, with cheaper product starting to be offered by the USA.

“Our lineup is at the limit of what is capable of putting soy out of Brazil and drawing a parallel with the corn market, we see that three or four weeks ago, little corn is shipped in Brazilian ports, with all our capacity logistics concentrated in the flow of soybeans “, he adds.

Regarding the impacts of PSA, Pereira says that the market sees the Chinese government much more agile in controlling and combating new possible outbreaks of the disease than in the past, given his greater knowledge about the cases after the 2019 epidemic.

Luiz Fernando Gutierrez, Market Analyst at Safras & Mercado

Gutierrez also highlights the limited impact of African Swine Fever on Chinese soy demand. “We have strong Chinese purchases, enough soybeans to ship in April, May, although without records, everything indicates a very strong month. So, we do not see any major problems with Chinese demand.”

If the situation worsens, worsens, the impact could come, however, there are no prospects that problems can be observed from these conditions on the Chinese acquisitions of soybeans.

“Chinese demand is stationed in Brazilian ports, they are practically not buying anything from the USA, and this can be seen in our lineups, which are quite strong and we will continue to see them in the coming weeks and months because we are at the peak of our exports”.

Victor Martins, Chief Analyst at AgResource Brasil

“The market is basically looking at swine fever outbreaks, especially in southern China, which is the major plantation hub. And we are already hearing reports of increases in outbreaks in poorer provinces in China that brought a little dread. to the market, causing the bran futures to fall on the Dalian Stock Exchange, the margins would be very negative, but in practice that is not what we are seeing, “he explains.

Margins are also negative, according to Martins, because if you bought more expensive soy, bran stocks were higher – and are already running out – China’s soy stocks are the lowest since 2015 and the country is already feeling this absence of Brazilian product due to the delays that had been registered in the shipments.

“Looking at the G3 – Brazil, Argentina, United States – we have a cumulative amount of soy shipped to China of 50.3 million tons, a historic record. China has never imported so much soy from October to early April, an increase in performance 16% compared to last season, which is equivalent to 7 million tonnes, and which corresponds to 50% of the Chinese import program estimated by the USDA in just six months “, says the analyst.

BRAZILIAN SOY FLOW

The map of ships loaded with soybeans, originating in Brazil, shows the intensity of the flow of the national oilseed with most of the vessels destined for China. And this increase in the quantity of bulk cargoes carrying soybeans for the Chinese at this time is due to a better rate of shipment that occurred in the country’s ports in March, when Brazil shipped a record amount of soybeans for the month.

There were almost 13.5 million tons, according to figures from Secex (Secretariat of Foreign Trade). And the lineups indicate that, in April, the volume may be even greater, since a lot has been ‘rolled over’ for this month given the delays observed at the beginning of the year.

Map of ships - Soja Brasil

Fonte: Refinitiv – LSEG

The chart below the Refinitiv – LSEG (London Stock Exchange Group) shows that shipments of the commodity could exceed 15 million tons (yellow bar) by following the pace at which they are happening. Confirmed, the total may exceed that recorded in April 2020.

BR x USA soybean flow charts

Fonte: Refinitiv – LSEG

In the third image, it is possible to see soybean exports from Brazil divided by destinations and China highlighted in the yellow bars. The volume also exceeds that registered a year ago and makes clear the spikes in purchases by the Asian nation in the first months of the year in the Brazilian market.

BR x USA soybean flow charts

Fonte: Refinitiv – LSEG

AMERICAN SOY FLOW

In February, US soybean exports were 4.56 million tons, a volume 5% higher than the average of the last five years for the same month. Of the total, 30% had China as their destination and, on the other hand, the total that went to other destinations broke a record.

BR x USA soybean flow charts

Fonte: Karen Braun

Thus, the total of 1.39 million tonnes shipped to the Chinese in February (indicated in the black line of the graph below) marks the second lowest volume since 2004 for the period, according to the international expert in agricultural commodities, Karen Braun. “However, this ‘reduction’ comes after a spectacular interval from December to January of shipments of 12.25 million tons, 22% more than the previous maximum for the period,” he says.

US soybean exports - China Feb21

Fonte: Karen Braun

Between September 2020 and February 2021 – the first half of the US 2020/21 trade year – the country exported 54.05 million tons, with 64% of this total destined for the Asian nation. The total exceeds 21% over the 2016/17 harvest.

BR x USA soybean flow charts

Fonte: Karen Braun

And in the first half of the US trade season – September to February – North American exports to the Asian nation totaled a record 34.7 million tons, exceeding the previous high, recorded in the 2016/17 crop, by 9% . As of March 25, China had already committed 36.05 million tonnes of U.S. 2020/21 oilseed, according to Karen Braun.

Accumulated China-USA - Soybean Exports 2020/21

Fonte: Karen Braun

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