China’s Soybean Buying Spree: Are Brazilian Stocks Running Low?

USFR-RT2 pork week
China may be sourcing more soybeans, but the United States isn’t China’s main buying destination. Chinese Customs data shows China’s total soybean imports jumped up 40% in May compared to April. ( AgWeb )

China may be sourcing more soybeans from the U.S., but the United States isn’t China’s main buying destination right now. Chinese Customs data shows China’s total soybean imports jumped up 40% in May compared to April, with the biggest buys happening in Brazil. According to the data, Brazilian shipments to China shot up 27% compared to May 2019.

With all this buying, is Brazil running out of soybeans? Dan Basse of AgResource Company says not yet, but the supplies are dwindling quickly.

“I don't think there's any doubt the Brazilians are just about to the bottom, though they will continue to export fairly aggressively into the middle of August,” he says. “Thereafter, the U.S. has the market opportunity and you can see and basis levels this week, Brazilian beans are about 54 cents more expensive now than the U.S. Gulf. That's why we're seeing this shift in business.”

Basse says China hasn’t started making buys from the U.S. for its reserves, but thinks the big buys out of Brazil may be attributed to some forward booking.

“In other words, if the Chinese government was refilling its reserves - and USDA kind of indicated this in their May WASDE - those additional imports are going into reserves, not the crush. So, the Chinese look like they forward bought maybe in the anticipation that there could be some political problems here as the Chinese are very wary about the Trump administration and how the rhetoric will play out heading into the election.”

During the latest Signal to Noise podcast, Farm Journal Washington Correspondent Jim Wiesemeyer said China's preference for Brazilian beans right now may be because of protein. He thinks the soybeans coming out of China have higher protein content compared to the soybeans harvested last fall in the U.S. He thinks China is buying more new crop from the U.S., in hopes the new crop beans be higher in protein. 

China is buying more new crop, and Basse says USDA hinted at that fact in the May WASDE report. With the next WASDE report scheduled for release this week, more revisions could take place. However, Basse fears those revisions may not be positive.

“We're looking for the WASDE on Thursday to come up with numbers that are a little negative to the market,” he says. “We think they could cut U.S. corn exports maybe 25 million bushels, cut U.S. soybean exports 25 or 50 million bushels.”

Moving forward, Basse says the major factor for the markets will be U.S. weather and forecasts for the second half of June.

“We calculate that about 50% of the U.S. corn crop will be pollinated about the 14th of July,” he says. “So, we're coming up some very interesting and critical timeframes for reproduction of U.S. crops.”