Chinese demand for grain imports takes tumble

There is some troubling demand news coming out of China, the world’s largest importer of grains and oilseeds.

The country’s January through August soybean imports are down nine percent compared to a year ago, corn purchases tumbled 21 percent, wheat fell 10 percent and barley plummeted 43 percent.

2021 import levels were through the roof.

In the meantime, World-Grain.com is reporting that China just announced plans to reduce the amount of soybean meal used in feed rations.

The Ministry of Agriculture and Rural Affairs posted a notice on its website on Sept. 19 outlining the plan.

“The demand for feed grains continues to grow, and the most prominent contradiction in food security lies in feed grains,” stated the ministry.

“Soybean meal reduction and substitution is not only a passive choice to deal with the uncertainty of external supply, but also an active action to implement the new development concept to promote high-quality development.”

World-Grain.com said the ministry noted that the amount of soybean meal used in aquaculture in 2021 was 11 million tonnes less than 2017 levels, the equivalent of 14 million tonnes of soybeans.

The United States Department of Agriculture is forecasting that China will import 97 million tonnes of soybeans in 2022-23, the third highest total on record.

Rich Nelson, chief strategist with Allendale Inc., said China’s soybean purchases in June, July and August have been anywhere from nine to 24 percent below average.

“It’s a clear concern for the U.S. side very specifically,” he said.

“This is our time to sell soybeans to China.”

The U.S. sales window starts to close in mid-December when China typically shifts to buying Brazilian soybeans.

Nelson believes the lackluster import demand is due to COVID lockdowns but those appear to be coming to an end.

The burning question is, will they go back to normal import levels in September, October and November or will they continue to show restraint due to concerns over crush margins?

If imports continue to remain soft that will become a major worry for the soybean market. But Nelson isn’t overly concerned yet.

“We already have prior sales made that make us feel comfortable for now,” he said.

Nelson said Chinese importers are keeping a close eye on the pace of seeding in Brazil and the lingering La Nina, which could hurt production prospects in that country. That would obviously boost demand for U.S. soybeans.

MarketsFarm analyst Bruce Burnett said China’s slumping import numbers make sense given recent circumstances.

“Their economy has been in some form of (COVID) lockdown for most of that period of time,” he said.

But he noted that imports are only one part of China’s demand story. The country has plentiful domestic crop production and holds substantial reserves of many of the commodities in question.

Burnett thinks the most worrisome number is the soybean one because China does not have ample soybean reserves.

But he agreed with Nelson that the next three months are going to be critical.

Tags: China, corn, barley, soybean, Grains, oilseeds, wheat, soybean meal, purchases, imports