China has purchased at least seven shipments of US soybeans amid rising demand

On July 6, China purchased at least six to seven cargoes of U.S.-origin soybeans totaling approximately 330,000 tons, according to several traders, buyers, sellers, and Asian market analysts.

The contracted volumes are intended for shipment between September and November through export terminals in the US Gulf of Mexico (USG) and the Pacific Northwest (PNW). One Chinese importer estimates that approximately five cargoes were purchased for delivery through Gulf of Mexico ports and another two through Pacific Northwest terminals.

According to two Chinese traders, U.S.-origin soybeans for October shipment were sold at a premium of 278-280 cents per bushel over the November CBOT futures (Contract X) on CFR China terms for delivery through Gulf of Mexico ports. For shipments via the Pacific Northwest, the premium was approximately 270 cents per bushel over the November contract.

Deals for September shipments were concluded at roughly similar price levels, according to one market participant.

According to traders, these purchases were not unexpected by the market. Reports of increased activity by Chinese buyers and a possible increase in purchases had been circulating in the market over the past week.

“Just last week, market participants were discussing purchases of approximately 20,000 soybean futures contracts from China’s government reserves. This is equivalent to at least 2 million tonnes of soybeans,” a Singapore-based trader reported. He added that once futures positions had been established, physical purchases were only a matter of time.

A Chinese trader expressed a similar assessment. He added that the market was discussing reports that China’s government reserves were purchasing futures contracts equivalent to approximately 2 million tonnes of soybeans weekly. If this pace continues, total purchases could reach approximately 12 million tonnes by the end of August.

He also noted that investment funds have begun actively increasing long positions in anticipation of further demand from China, which has contributed to the rise in soybean prices on the Chicago Board of Trade (CBOT).

“After reports of Chinese purchases of U.S. soybeans, the futures market reacted extremely sharply,” another Chinese trader confirmed.

However, Brazilian soybeans remain more competitive for commercial importers. Chinese buyers continue to pay an additional 10% import duty on soybean shipments from the U.S.

Considering comparable quality characteristics and delivery terms, the price level for U.S. soybeans traded through Gulf of Mexico ports represented a premium of 291-293 cents per bushel over the November CBOT contract on CFR China terms. A quality differential of 13 cents per bushel relative to Brazilian products was also taken into account in the calculation.

For comparison, as of July 6, premiums for Brazilian soybeans for October delivery were offered at 233 cents per bushel over the November CBOT CFR China futures contract.

According to Platts, a subsidiary of S&P Global Commodity Insights, the SOYBEX China CFR index price on July 6 was $509.73 per tonne, $11.21 per tonne higher than the previous trading day.

Tags: China, soybean, USA