CFR China soybean prices slide amid rising Brazilian exports

CFR China soybean prices have fallen sharply, pressured by the weight of Brazil's soaring exports, while spurring demand for the raw material as Chinese crush margins soared.

Chinese soybean prices, outright and basis to Chicago Board of Trade futures, have been on a downtrend since the third quarter of 2022.

The CFR China month-one flat price sank to $517.08/mt on April 21, a low not reported since January 2021, losing 5.6% week on week and 8.6% month on month, data from Platts, part of S&P Global Commodity Insights, showed.

Similarly, the CFR China basis collapsed to minus 57 cents/bushel to the July (N) CBOT contract on the same day, down 171% week on week. The record low was on April 20 at minus 61 cents/bu.

The prices were under pressure from the surge in exports from Brazil, sources said.

Soybean exports from Brazil -- the world's top soybean supplier -- between April 1-16 surged 42.5% on the year, according to the country's foreign trade department Secex, likely signaling higher supplies of the oilseed.

Chinese crusher demand rises on improved margins

Lower prices of imported soybeans have improved crush margins in China, attracting buying interest from crushers. S&P Global has observed an increase in the number of bids in the CFR China soybean market since last week.

The spot soybean meal price was at Yuan 4,400/mt April 20, up 10% week on week, sources said.

"With higher soybean meal prices and falling soybean costs, the replacement crush margin turned positive last week and increased to Yuan 180/mt April 20," a Chinese crusher said.

Platts assessed the China soybean gross crush margin at $18.35/mt April 21, up 75% week on week, S&P Global data showed

Local soybean meal prices have reacted positively to the news that the release of test reports by the China Entry-Exit Inspection and Quarantine Bureau has slowed down.

"Although the official institution announces that it takes 20 working days to issue the test report, importers normally obtain the test report within 2-4 working days," a Chinese crusher said.

However, the actual inspection process has likely lengthened to 18-20 working days, which would make cargo collection slower than usual, multiple crushers said.

"This would result in a lower soybean inventory and motivate crushers to purchase locally produced soybeans as the government might want to support the price of local beans," a market source said.

As crush margins improved, both state-owned crushers and commercial crushers in China started to cover their demand for spot and nearby shipments.

For the week up to April 21, 35-40 cargoes have traded to China, sources said.

However, demand coverage for forward shipments is not as active as the sharp drop in prices has increased the basis risk for traders.

"Basis risk has discouraged us from purchasing for forward shipment such as July and August, hence, we need to see the bottom price for June shipment before purchasing for the forward," one of the largest Chinese crushers said.

As of April 21, the Chinese soybean demand coverage for July and August shipments is low. Less than 20% of the total open demand of 8 million mt has been covered for July, while for August shipment, less than 5% of the total open demand of 8 million mt has been covered, according to sources.