Chinese soybean imports extended their record start to 2017,
despite a slip by crushers into a loss, with the extent of purchases seen as boding
well for prices of the oilseed.
China imported 8.02 million tons of soybeans last month – a rise
of 13.4% year on year, and indeed a record for April, customs data showed.
The figure represented a fourth consecutive month when imports
have set a record for the month, with total volumes for 2017 for the period up
18% year on year.
And buy-ins are seen remaining strong for May and June too,
at some 8m-9m tonnes a month, demand that Commerzbank said offered hope for
soybean bulls, who have seen Chicago soybean futures recover somewhat after
hitting a one-year low last month.
'Support the price'
"Imports are expected to grow further over the next few
months as China's demand for soybeans to produce animal feed and edible oil
remains unabated," the bank said.
"The continuing robust demand – especially from China, which
accounts for over 60% of global imports – is likely to support the soybean
The buoyancy in imports reflects the feed needs of the
country's huge and growing pig industry. Indeed, Cofco, the state-owned ag
giant, said that it intended by 2020 to hike by 2m hogs, to 5m hogs, its production
Nonetheless, thanks to industry overcapacity, China's oilseed
crushers have been running at negative margins for two months.
'Positive for demand'
Margins, which hit negative 251 yuan per tonne of imported
soybeans in late April, are currently a negative 211 yuan per tonne for
processors in the province of Shangdong, according to Reuters data.
However, Chinese plans in July to cut VAT on imported
soybeans by 2 points to 11% are seen as a boost to margins ahead.
"China's decision to adjust their VAT from 13% to 11% is
viewed as a life line to struggling crushers," said US broker Benson Quinn
"Longer term it is a positive for Chinese soybean demand."
switch to soy
The growth in demand is fuelling domestic growth in soybean
production too, as highlighted by separate data from China's National Grain and
Oils Information Centre showing that the country will expand production of the
oilseed this year by 9.2% to 14.3m tonnes.
These estimates assume a 10.5% increase in the soybean area
to 7.9m hectares, and respective 2.7% and 3.1% cuts in the corn and rapeseed
crop areas to 35.4m and 6.88m hectares.
The centre predicts that China's domestic corn production
will drop by 3.7% to 211.5m tonnes, as a change in subsidies continued to reduce
the appeal to farmers of growing the grain.
The rapeseed harvested was pegged 1.9% lower at 13.7m tonnes.