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Chinese Buyers May Cancel U.S. Soybean Orders
USAgNet - 12/01/2020

Some Chinese soybean importers and processors are looking to cancel deals signed for U.S. cargoes for December and January shipment, after crushing margins collapsed following a steep rally in Chicago futures, three trade sources said.

According to Reuters, this is a first sign of slowing Chinese demand after a five-month buying spree that combined with dryness in top producer Brazil to add more than quarter to benchmark Chicago futures since the crop year began on Sep. 1, and 13% this month. China is the world’s biggest soybean importer, accounting for more than 60% of shipments.

“Small private soybean importers are trying to wash out December and January U.S. soybean shipments as crush margins have turned negative,” said one trader at a leading soybean processor in China. “This is for those importers who bought cargoes but did not (set the) price in the futures market.”

Soybeans are crushed for oil, used mainly in cooking, and soymeal, an animal feed vital to the hog and poultry sectors. China stepped up soy imports to a record this year as it rebuilds a pig herd decimated by deadly African swine fever in 2018 and 2019.

Beijing has also hastened U.S. soybean purchases to comply with “phase 1” of the U.S-China trade deal, which called for massive increases in its purchases of farm goods. Soybeans have historically been the most valuable U.S. farm export.

Profitable domestic crush margins combined with multiyear-low U.S. soy prices this summer triggered strong Chinese buying of U.S. supplies from August, ensuring that U.S. exports to China started the 2020-21 crop year at a record pace.

However, this month’s steep advance in prices is starting to erode buyer enthusiasm.

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