Trade hopes boost soybean prices as China makes first US purchases in months

Shortly before a summit between leaders Donald Trump and Xi Jinping, China’s state-owned COFCO purchased three US soybean cargoes. 

These were the first purchases by China from this year’s US harvest, according to a Reuters report.

US farmers, who largely supported Trump’s presidential campaigns, have lost billions in sales due to the lack of Chinese purchases amid the ongoing trade tariff dispute between the two nations.

Despite COFCO’s recent purchase of approximately 180,000 metric tons of soybeans for December-January shipment—China’s first such acquisition in months—traders anticipate no substantial resurgence in demand for US cargoes, given recent large South American purchases.

“COFCO has proceeded to purchase US beans even before the two leaders have reached a trade agreement,” a trader at an international trading company that supplies Chinese crushers was quoted in the Reuters report.

The volumes booked by COFCO are not that large, three cargoes for now.

Soybean prices surge

Chicago soybean futures reached a 15-month high this week, recovering from recent five-year lows. 

This surge is attributed to optimism surrounding a potential US-China trade agreement.

Soybean prices had reached a 15-and-a-half-month high, nearing 1,100 US cents per bushel, driven by optimism surrounding a potential trade agreement between the US and China.

Soybean imports from the US by China ceased in September for the first time in seven years, coinciding with a sharp decline in overall purchases in recent months. 

According to customs data, total imports for September reached 12.9 million tons, marking the second-highest monthly level ever.

The US Department of Agriculture has paused the publication of crop progress and export data due to the current government shutdown.

Carsten Fritsch, commodity analyst at Commerzbank said:

As a result, there is a lack of information on soybean supply and demand in the US.

Poor demand

China has almost finalised its soybean import bookings from Brazil and Argentina for November, accounting for over 60% of global soybean imports. 

Limited purchases are anticipated for December and January, prior to the Brazilian harvest.

US suppliers have largely missed out on the oilseed crushing business. One oilseed trader anticipates China will require approximately 5 million tons of shipments in December and January, with market conditions favouring Brazil.

This week, US soybean prices have risen to match Brazilian cargoes, trading at approximately $2.45 per bushel above Chicago futures. 

This marks a shift from recent weeks when US soybeans were significantly cheaper due to weak Chinese demand, according to traders.

Private Chinese buyers often favour Brazilian soybeans due to their superior protein content, which typically commands a premium over US soybeans. 

This preference was noted by Jeffrey Xu, general manager of Shanghai-based OCI, a soybean consultant, and two other traders.

However, between December and May, China is projected to purchase approximately 8 million tons of US soybeans for its strategic reserves. 

This acquisition, estimated at around $4 billion, would be facilitated through state-owned enterprises like Sinograin, according to the report.

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