China soybean demand is expected to ease in the coming months as animal feed consumption slows and crushing margins remain negative, reducing scope for additional US shipments after soybeans were excluded from proposed tariff relief following last week’s Washington summit.
Officials signaled plans to cut tariffs on a broad set of US farm goods. However, soybeans, China’s largest agricultural import from the United States, did not make the reduction list after talks between President Xi Jinping and President Donald Trump, according to people familiar with the discussions.
China soybean demand and tariff backdrop
Private oilseed processors in China, the world’s largest soybean buyer, have already secured most of their needs through the Lunar New Year in early February with supplies from Brazil, Argentina, and state reserves, traders and crushers said. A senior executive at a Chinese crushing firm said October coverage and much of November had been booked from South America, with arrivals timed around the peak holiday demand period. The executive added that further purchases would likely incur losses.
State-run companies have purchased about 13.7 million metric tons of newly harvested US soybeans since a bilateral trade deal in May, according to three Asia-based agricultural traders who requested anonymity. Private crushers, by contrast, have focused on South American cargoes, the traders said.
US soybeans continue to carry an additional 10% tariff imposed at the start of last year’s trade war, leaving them uneconomical for commercial buyers. Brazilian soybeans were quoted at roughly the same level as US cargoes this week, excluding tariffs, at about $590 per ton including cost and freight, according to a senior Chinese crushing executive and an Asia-based trader. Brazilian beans typically have higher oil content, making them more attractive to processors, they said.
Margins under pressure as inventories swell
Benchmark Chicago futures have fallen about 1.5% so far this week, with analysts expecting further pressure as the US harvest ramps up and Chinese buying cools. Crushing margins for November-shipment soybeans were estimated in the red at $17.90 to $29.83 per ton for US Pacific Northwest and US Gulf supplies, and around minus $17.90 per ton for Brazilian beans, said Rosa Wang, an analyst at Shanghai JC Intelligence.
Processors in Rizhao, a key coastal hub, were losing 33.54 yuan per ton on Tuesday, LSEG data showed. Import demand has softened as plants hold elevated stocks and anticipate weaker fourth-quarter feed use, with sow herds shrinking amid efforts to rein in overcapacity in the hog sector.
Soybean inventories at 111 Chinese crushing plants rose to 7.96 million tons in the week of September 25, the highest in at least 15 years, according to consultancy Mysteel. In the latest Sinograin auction of imported soybeans, only 37.3% of the 514,000 tons offered found buyers, Mysteel data showed, underscoring tepid interest.
Purchasing slows, outlook hinges on margins
Chinese buyers booked around 50 soybean cargoes in the first three weeks of September, the fewest for that period in four years, said Eduardo Vanin, senior agriculture strategist at Marex in Curitiba, Brazil. He added that state-run COFCO and Sinograin accounted for about 30 US cargoes, while private buyers sourced mainly from Brazil and Argentina.
Commercial purchases are unlikely to pick up unless processing margins improve, said Johnny Xiang, founder of AgRadar Consulting in Beijing. If supplies tighten, buyers may prefer tapping reserve auctions or scheduling plant maintenance rather than stepping up imports, he said.
Reporting by Naveen Thukral and Ella Cao. Editing by Christian Schmollinger.
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