China’s soybean imports are likely to rebound in the fourth quarter as seasonal demand rises and processors in the world’s biggest buyer look to replenish supplies after lower-than-expected sales from state stockpiles, according to industry analysts.
Sales from state reserves have totaled just 1.1 million metric tons, compared with expectations for 3-4 million tons, said Li Lifeng, an analyst with industry portal cofeed.com.
China’s imports dropped 13 percent from a year earlier in the two months to July to 15.3 million tons as demand from hog breeders declined because of flood damage. They may fall below 6 million tons a month in September and October as crushers had cut orders in anticipation of higher stockpile sales, said Yang Linqin, an analyst with Cofco Futures Co.
“Sales from state reserves were lower than expected and sales in coming weeks will stay low,” Yang said.
That’s likely to boost imports from the U.S. and may support benchmark prices in Chicago, which have been pressured by expectations for a record harvest. Soybeans for November delivery on the Chicago Board of Trade have fallen 17 percent from their closing high this year on June 10, while the most-active contract in Dalian has fallen about 1.7 percent over the same period.
“Crushers need to replenish stocks after a shortfall of imports in September and October,” just as seasonal demand increases, Li said. “The state reserves are of poor quality and oil content is low. The soybeans have been stored for too long.”
Imports from Brazil, the world’s largest supplier, fell 6.2 percent in July from the year before and will continue to slide for the rest of the year as drought there forces local crushers to halt production. Imports from the U.S. are down 7.1 percent so far this year.
“U.S. exports to China in the fourth quarter will recover significantly from last year, when its market share was squeezed by South American supplies,” Yang said.
Brazil exported 25 percent more soy to China in 2015, taking nearly half of China’s total imports while shipments from the U.S. fell 5.4 percent, giving it a market share of 35 percent, official customs data showed.
Domestic demand for soy meal, a major feed ingredient and byproduct of soy crushing, is also recovering from a weak performance in July, said Cofco’s Yang.