China has returned in full force to the U.S. soybean market following the trade dispute that began two years ago, giving American exporters hope that the upcoming shipping season will be their most successful in three years.
The Phase 1 trade deal signed at the beginning of this year implied China must book record or near-record volumes of U.S. soybeans through at least the end of 2021. Despite historically light purchases in the first few months of 2020, the Chinese seem to be making up for lost time, at least for now.
In addition to the Phase 1 agreement, Chinese feed demand is expected to rise from last year as it builds back up the hog herd after huge losses from African swine fever. Some market analysts also expect China may build soybean reserves.
As of July 16, China had booked 6.1 million tonnes of U.S. soybeans for the 2020-21 U.S. marketing year that begins Sept. 1, according to the U.S. Department of Agriculture. That is China’s largest volume of new-crop soybeans for the date since 2014, and most of this year’s purchases occurred over the last several weeks.
The only other years besides 2014 in which China’s mid-July new-crop soybean purchases were larger than this year were 2011, 2012 and 2013.
Soybean sales for 2020-21 to all destinations as of July 16 totaled 10.4 million tonnes, also a six-year high. However, non-Chinese bookings stood at 4.3 million tonnes, which is around average for the date.
China is by far the largest buyer of U.S. soybeans and that has held true despite the trade war. But other customers may need to account for at least 40 per cent of annual U.S. shipments, so that number must also be monitored.
China has remained active in the U.S. market since July 16, booking a minimum of 1.04 million tonnes of soybeans in the days since. That is the total amount that has been confirmed through USDA’s daily reporting system, sometimes called flash sales, which publicizes daily U.S. grain and oilseed purchases above a certain tonnage.
USDA this month has flashed some 7.78 million tonnes of U.S. grains and oilseeds through July 23, the most for the full month in at least seven years. Corn accounts for 52 per cent, soybeans 44 per cent, and wheat occupies the rest.
Some 84 per cent of those daily sales have been to China and another 14 per cent were purchased by an unknown buyer. In the soybean market, “unknown” buyers are typically assumed as China since it is the top customer.
USDA announced that China bought 132,000 tonnes of new-crop soybeans on July 23, and that was the eighth trading day in a row that contained one or more flash sales.