Chinese soybean demand could define stock market strength and movements

The stock market was rather slow in a cautious week, with prices virtually stable both in Chicago and the Brazilian physical market. Players await further developments in the trade relationship between China and the United States, while the market monitors the US harvest. High yields are still being expected in US crops, although the area has been significantly pressured. The true picture will only become clearer with the harvest data, to be released between September 15 and 20.

Currently, US stockpiles are projected at tighter levels. If there are any yield cuts, that will likely support Chicago. However, without any buying activity from China, there is a risk of excess stocks, which could lead the government to revise EPA policies to sustain demand. However, this is unlikely, as domestic crushing levels are quite high and may be even revised.

Regarding US exports, several points are worth highlighting. The last soybean shipments to China occurred in May (approximately 65,000 tons). Since then, only South America has supplied the Chinese, which was expected for this period. Argentina, in fact, shipped significant volumes of soybeans in July. Even so, the new US crop remains open. It is worth remembering that the tariff truce between the United States and China was extended until November 10, and if tariffs remain at these levels, the costs would be viable for China to import US soybeans. Furthermore, the Brazilian flat price is more expensive than the North American for November: approximately USD 445/ton FOB Brazil versus USD 420/ton FOB Gulf. In other words, Brazilian soybeans are relatively expensive compared to US soybeans, exacerbated by an exchange rate that has favored the real.

However, a clearer outcome is unlikely to emerge until late September, a period when Chinese purchases traditionally begin to pick up pace, with more significant volumes in October and a peak in November. During this period, it will be crucial to monitor US sales and shipment reports, as they converge with fluctuations in premiums in Brazil and the shipment schedule, which remains quite strong. It is worth highlighting some particularities: there was a reallocation of cargo from August to September, which concentrates high volumes this month.

In short, whatever Chinese demand in the United States is not met tends to be sought in Brazil. However, without a significant decline in the US crop, stockpiles could rise again, a scenario that would put pressure on Chicago. For Brazil, this scenario would imply a new round of higher premiums, as they recently fell by approximately USD 0.50 at major ports.

Tags: stockpiles, China, exports, prices, United States, yields, Market