Macro

China Buys 132,000 Tons of US Soybeans for 2024, Seven Months Late

China buys 132,000 metric tons of US soybeans for 2024-25, seven months later than usual.

By Athena Xu

7/10, 13:23 EDT
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Key Takeaway

  • China made its first purchase of 132,000 metric tons of US soybeans for the 2024-25 season, seven months later than usual.
  • US soybean futures have tumbled about 17% this year, making them more attractive amid recent price declines.
  • Brazil's weaker real has boosted its soybean sales to China, intensifying competition with US farmers.

China’s Delayed Soybean Purchase

China, the world’s largest importer of soybeans, has made its first purchase of US soybeans for the 2024-25 season, months later than usual. The US Department of Agriculture announced on Wednesday that China purchased 132,000 metric tons of soybeans for the upcoming marketing year. This purchase is significantly delayed compared to the previous year when China began buying American supplies in December 2022, roughly seven months earlier.

Ben Buckner, chief grains analyst for AgResource Co., commented, “The market is finally uncovering demand, and China can’t quite avoid US soybeans entirely.” This purchase comes amid recent price declines that have made US soybeans more attractive. Futures in Chicago have tumbled about 17% this year, with prices touching the lowest level since 2020 earlier this week.

Brazil’s Competitive Edge

The US competes with Brazil for shipping soybeans to China. A weaker Brazilian real has shielded farmers in the South American country from this year’s price plunge, encouraging them to boost sales. Brazilian farmers sold more than 4 million metric tons of soybeans in the five days ended July 5, the most for a similar period since October 2020, after the currency plunged to its weakest level in more than two years against the dollar. Victor Martins, a risk manager at brokerage firm Amius Ltd., noted, “This is bad news for US exporters. The currency boost may give Brazilian farmers a competitive advantage lasting well into the fourth quarter, shortening the period in which US suppliers typically have the upper hand.”

Soybean futures have lost almost 13% — or $1.68 per bushel — this year through Friday due to the outlook for ample supplies globally. The decline is reduced to only 1.7% — or the equivalent of 19 cents — when prices are converted into reais. In Sorriso, a key producing region in Mato Grosso state, cash prices were up 3% year-to-date. The correlation between soybean prices and the Brazilian real was as high as 59% in June, indicating that the commodity and the Brazilian currency tended to move in the same direction.

US Soybean Crush Margins

US soybean board crush futures ended last week at $77/MT, the highest since November 2023, and up from $46/MT a week prior. This margin improvement was driven by a combination of higher-priced soybean oil (+13% week over week) and soybean meal (+7%). Board crush futures now point to an average of $46/MT in 2024, up from $39/MT the week prior. Near-term contracts have risen by more than longer-dated contracts.

Cash soybean crush margins have not risen as much as board crush. Cash soybean crush margins have been on the upswing in recent weeks, rising to $76/MT last week, down from $82/MT in the week prior but up from $46/MT in the week ending May 31st. This improvement since May was aided by cheaper soybean prices, not higher-priced meal and oil. By our calculation, board crush margins outpaced cash crush for just the second time in the past decade (the other instance was in May). The cash price of soybean oil increased 12% W/W, but the price of soybean meal was stable W/W and the price of soybeans rose 7%.

Street Views

  • Ben Buckner, AgResource Co. (Neutral on US Soybeans):

    "The market is finally uncovering demand, and China can’t quite avoid US soybeans entirely."