China’s soybean imports will rebound faster than had been expected, thanks to the resumption of growth in the crush, US officials said - although, against raised ideas of Brazil’s output, support to futures prices proved short-lived.
The US Department of Agriculture, in its much-watched monthly Wasde briefing on world crop supply and demand, raised by 3.0m tonnes to 88.0m tonnes its forecast for Chinese soybean imports in 2019-20.
The upgrade took the estimate for imports by the world’s top soybean-buying country well above the 82.54m tonnes recorded for last season, when demand was undermined by the dent to feed demand from the massive cut in China’s hog herd forced by African swine fever.
Indeed, at 88.0m tonnes, they would represent the third largest ever, behind the record 94.1m tonnes achieved in 2018-19, and 93.5m tonnes the season before.
The figure was also close to an 87.68m-tonne estimate that China’s own farm ministry revealed earlier on Tuesday, in its so-called monthly Casde crop report.
The increased import need reflected a “higher soybean crush”, US officials said, upgrading by 1.0m tonnes to 86.0m tonnes their forecast for Chinese processing volumes of the oilseed in 2019-20, which they had expected to remain static year on year.
And the officials also forecast the US itself meeting some of this extra import demand, raising their forecast for US soybean exports in 2019-20 by 1.4m tonnes (50m bushels) to 49.7m tonnes (1.825bn bushels), “partly reflecting increased imports for China”.
The revision prompted a corresponding cut of 1.4m tonnes to 11.55m tonnes (425m bushels) in the forecast for US stocks at the close of the season.
At that level, they would be down by more than 50% from last season, and at their lowest in three years.
Nonetheless, while the immediate market reaction was to prompt a recovery in soybean futures, which for March revived from negative territory to stand up 1.1% on the day, the headway proved fleeting.
An hour after the data were released, the contract stood at $8.84 ¼ a bushel, flat on the day, amid persistent doubts over whether hopes for Chinese purchases of US supplies will be fulfilled.
Chinese orders of US soybeans are “something the trade is still looking for in large quantities”, said Terry Reilly at broker Futures International.
Indeed, market talk of late has centred on enhanced Chinese purchases from South America, and the USDA in the Wasde raised its forecast for Brazilian exports in 2019-20 by 1.0m tonnes to 77.0m tonnes, which would represent a record high.
The increased Brazilian soybean export forecast reflected a 2m-tonne upgrade to 125m tonnes in the estimate for the ongoing harvest, “due to favourable weather in Mato Grosso as well as improved rainfall in southern and north eastern soybean areas”.
‘Found selling pressure’
At Global Commodity Analytics, Mike Zuzolo said that soybeans had “found selling pressure thanks to the corn and wheat”, with futures in both grains falling following the Wasde.
Chicago corn futures for March, which had stood flat ahead of the briefing, stood down 0.5% at $3.80 ¼ a bushel an hour later, when wheat futures for March stood down 1.5% at $5.43 ½ a bushel, extending pre-Wasde losses.
“The demand bump for US grain exports [in the Wasde] was not as big as expected given trade deals,” Mr Zuzolo said, with the US having sealed a revised Nafta agreement, USMCA, with Mexico and Canada over the past month, besides the so-called “phase one” accord with China.
For wheat, the US raised its 2019-20 export forecast by 700,000 tonnes (25m bushels) to a three-year high of 27.2m tonnes (1.0bn bushels), “reflecting growing competitiveness of international markets”.
However, for corn, the export forecast was cut by 1.3m tonnes (50m bushels) to a six-year low of 43.8m tonnes (1.725bn bushels), “reflecting the slow pace of shipments through January”.
The corn downgrade was, however, offset by an increase to the forecast for the tonnage the grain used by US ethanol plants, which after “robust” January data was upgraded to 5.425bn bushels.