China soybean prices set new low amid higher Brazil output, bearish sentiments

Chinese soybean prices have continued its downtrend in the week to March 22, with the basis to CBOT futures hitting a new lowest level since 2018, amid higher crop forecast in Brazil and lower demand coverage for nearby shipments.

Platts, part of S&P Global Commodity Insights, assessed CFR China soybean M1 basis down 13 cents/bu at 67 cents/bu over May CBOT on March 22, representing a 16% drop on the day.

Brazilian private analyst Agroconsult increased its crop forecast in the country by 2 million mt to a record 155 million mt based on the latest crop tour data.

Soybean exports out of Brazilian ports have been strong and could reach 15.39 million mt in March, up from 7.55 million mt in February and 12.16 million mt in March 2022, the Brazilian Grains Exporters Association said.

According to market sources, China’s demand coverage for May shipment is at 5.9 million mt with a revised demand of 9 million mt, while June shipment is about 2.5 million mt with an expected demand of 7.5 million-8 million mt. Industry sources have reduced May open demand to 9 million mt from initial estimations of 10 million mt.

The overnight slide in soybean prices attracted some buying interest but bids from crushers rapidly retreated as CFR China soybean basis continued to show signs of further weakness after a trade closed at a lower basis than the previous, a Chinese trader said.

“If the Chinese crushers have a bigger required volume, they could have booked one or two May shipments at the prices last night but for the rest of us…we don’t know how low it will be, so bidding activities evaporated,” a Chinese crusher said.

“The level that it was trading at minus 45 cents/bu to minus 50 cents/bu over CBOT, and we are about another 15 cents/bu away from the historical low,” a trader said. “The question now is where the floor for the basis is, but I think no one dares to guarantee.”

A broker said soybean prices are expected to remain weak until the end of the month. However, there is still demand for China in May to August shipment at present, but crushers could wait for the crush margin to improve or for basis to find the lowest point before locking in their purchases.

For Brazil May shipment, Platts assessed the flat price at $562.36/mt as of March 22, down 2.21% on the day.

Platts assessed China gross crush margin at $1.95/mt March 22, compared to the value at minus $3.79/mt March 21.

Tags: futures, demand, China, exports, Brazil, prices, soybean, crop, forecast, shipments