Excess Supply Limiting China's Import Appetite

The abundance of soybeans in China poses a significant threat to US soybean exports, particularly during the peak marketing period between September and December. Analysts predict that the record-level purchases, combined with weak demand for animal feed, will increase stockpiles and put further pressure on the prices of soybean oil and soybean meal.

Price Declines and Refining Margins

In recent weeks, the reference price for soybean meal (DSMcv1) in Dalian has fallen by approximately 8%, while soybean oil (DBYcv1) dropped around 4% last week. A trader from an international company operating oilseed processing plants in China highlighted the issue: "The main problem is that demand for soybean products is not increasing. Refining margins are under pressure due to the excessive supply of beans."

Impact on the Pork Industry

Soybeans are processed into soybean meal, a protein-rich feed for China's vast hog population, and soybean oil, primarily used for cooking. However, the slowing economic growth in China, which consumes nearly half of the world's pork, has reduced demand for both meat and feed products.

Record Soybean Imports

Traders indicate that China’s soybean imports in July, mostly from Brazil, are likely to reach record levels due to low prices and concerns over renewed trade tensions if Donald Trump returns to the US presidency. Refining margins, which have been negative since early June, declined further this month. Oilseed processors in Rizhao have faced losses exceeding 600 yuan per ton, the largest drop since February.

Government Auctions and Market Response

Since February, Sinograin, a state-owned soybean supplier, has auctioned about 9.68 million tons of imported soybeans. However, processors have purchased only 2.08 million tons, or 21%, according to Reuters' calculations based on auction announcements and analyst reports. Darin Friedrichs, co-founder of Sitonia Consulting, noted that last year around 27% of auctioned soybeans were sold, with higher participation rates.

Forecasts and Future Outlook

The Chinese Ministry of Agriculture's latest report predicts a decrease in soybean consumption from 115.24 million tons in the 2023/24 marketing year to 114.56 million tons in 2024/25. Meanwhile, Brazil has surpassed the US as China's largest soybean supplier, accounting for 70% of imports. China's soybean imports from Brazil increased by 2.2% in June compared to the same period last year, with 9.72 million tons imported last month, up from 9.51 million tons the previous year.

The current scenario highlights the complexities of the global soybean market, where supply abundance and fluctuating demand significantly influence trade dynamics. As China navigates its soybean surplus, the ripple effects on international markets and exporters underscore the need for strategic planning and adaptability in agricultural trade.