China has been the biggest buyer of U.S. soybeans in recent years, but as imports have caught up with the tariffs war between Beijing and Washington, Chinese buyers are now seeking to make up for the shortfall in Brazil.
As a result, Brazilian soybeans premium has soared to a four-year top towards the U.S. soybeans. Soybeans exported from the Brazilian port of Paranagua had been priced at $396.60 per tonne, which was $66.10 higher than the price of soybeans sold on southern Gulf of Mexico coast. This premium was the highest since September 2014. U.S. soybean prices have fallen 20% since April, falling to the lowest level in nearly 10 years.
As China began to impose a 25% import tariff on U.S. soybeans, the price of Brazilian soybeans has undoubtedly increased, and this measure has also weakened the value of U.S. soybeans. China companies significantly reduced the purchase of U.S. soybeans due to the loss of competitive advantage after the addition of tariffs. As of June 28, China has stopped purchasing U.S. soybeans for three weeks and canceled soybeans orders for 615,000 tonnes over the same period.
China is reducing the purchase of soybeans from the United States, and the price of U.S. soybeans has fallen to freezing point. The “low-price promotion” has also caused some countries to take stock of the goods. Other major soybean-growing countries, Brazil and Argentina, have snapped up some cheap US soybeans to supply their domestic markets. Not just Brazil, sales in some non-traditional markets in Europe, the Middle East and Southeast Asia are unusually high. According to the U.S. Department of Agriculture (USDA) report, since March, U.S. soybean exports to countries outside China have increased by 50% compared to last year.
China is also the world’s largest buyer of soybeans, buying almost 60% of the world’s soybeans. In 2017, the three major source countries of China’s imported soybeans are still Brazil, the United States and Argentina. According to the data of China Customs, last year, China bought 52.93 million tonnes of soybeans from Brazil, accounting for 53.3% of the total purchases; and purchased 32.9 million tonnes of soybeans from the United States, accounting for 34.4% of the total purchases, the lowest since 2006.
The USDA released a monthly supply and demand forecast report on the 12th of this month, it will reduce the China soybean import forecast for the next marketing year from 103 million tons to 95 million tons, and reduce the US soybean export forecast from 62.3 million tons to 55.5 million tons, down by nearly 11%. In addition, the report also raised Brazil’s soybean export forecast from 73 million tons to 75 million tons, which will hit a record high.