The recent spike in US soybeans exports to China, which was reportedly purchased for storage reserves, was not necessarily a sign of improving crush demand, industry sources said Nov. 9.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
Register NowUS export sales data for the week of Nov. 6 showed that up to 1,145,500 mt of soybeans had been sold to China, with state-owned Sinograin the likely buyer of up to 40 cargoes, but with the intention of storing the beans.
Table 1. US soybeans export sales data
| Export sales destinations | Volume (mt) |
| Export sales to China | 669,000 |
| Export sales to unknown destinations | 476,500 |
| Total reported in week of Nov. 6 | 1,145,500 |
Source: USDA Foreign Agriculture Service
Several market sources estimated that some of these trades were done between 215 cents/bushel over January (F) Chicago Board of Trade (CBOT) futures and 185 cents/bu over March (H) CBOT futures.
According to market participants, the recent US beans trades were concluded at a premium to Brazilian soybeans, currently the cheapest origin for forward shipment positions. Besides the lower oil content in US soybeans as compared to Brazilian beans, making the former a more durable option for storage, a Chinese trader also reasoned that the premium paid for US soybeans was due to logistical issues.
"It is possible that the US logistics is less congested compared with Brazil, so timely delivery is more possible," the trader said.
Others were of the opinion these deals could have been a sign of robust and improving trade relations between China and the US in light of the ongoing China International Import Expo in Shanghai, which featured an inaugural USDA-led delegation of agricultural companies and associations from the US.
Earlier in October, Chinese grain companies including COFCO and Sinograin participated in a formal agreement for the purchase of US agricultural products at a later date, according to a statement released by the US Soybean Export Council.
Nearby crush demand remains poor
Market participants noted that crush demand for nearby shipment positions remained weak, a contrast to the spate of purchases concluded for storage reserves. "The buying pace from private crushers is still slow," a Chinese trade source said.
According to market sources, crush demand coverage for December 2023 and January 2024 shipments as of this week stood at 38% and 8%, respectively, versus 43% and 15% for the same time last year. Coverage for February 2024 shipments are at 36%, a massive drop from last year's coverage pace of 61%.
Additionally, market participants believe the USDA will likely slash global soybean production in its World Agricultural Supply and Demand Estimates November report due out later Nov. 9, which could lend support to already elevated soybeans futures, further deterring buying interest.
While one trade source noted that poor spot demand could limit the upside to prices, another trader said the impact on demand would be outweighed by China's own economic situation.
"China's CPI in October fell 0.2% on year, while the PPI fell 2.6% on year. The domestic economy is still looking quite weak, which will continue to weigh on demand," the second traders said.
Platts assessed SOYBEX CFR China December shipment up $4.04/mt on the day at $572.47/mt Nov. 8, S&P Global Community Insights data showed, and January shipment up $4.05/mt at $565.49/mt.