Soybean CFR China prices to soften on ample supply, flat China demand

The CFR China soybean price is set to come under pressure in the first quarter of 2025 from rising production in Brazil and plateauing demand in China.

The soybeans CFR China flat price is closing 2024 down 24% year on year at $439.91/mt as of Dec. 12, according to S&P Global Commodity Insights data. Market watchers expect the price to slip to the $400-450/mt range in Q1 2025.

Brazil’s soybean production is projected to reach a record 169 million mt in marketing year 2024-25 (January-December), up 10.5% year on year.

China’s soybean supply is expected to be stable as planting accelerates and global supply loosens with improved weather in South America.

“Higher soybean production forecast for Brazil has been pretty bearish for the market unless rains do not come and affect projected yields,” an East China based trader said.

Monitoring weather changes and soybean growth in South American production regions will be critical to the market.

Brazil has surpassed the US to become China’s largest soybean supplier and is projected to maintain this position in MY 2024-25, according to the US Department of Agriculture. Seasonal delays in Brazil’s soybean planting may shift the peak harvest to March 2025, potentially creating a narrow window for US exports.

However, Chinese traders remain cautious due to growing concerns over a renewed China-US trade conflict. Despite this, China continues to buy US soybeans, likely front-loading to secure supplies ahead of potential tariffs.

“China has built massive soybean reserves that will help them cut off essentially any import of US soybeans and switch almost entirely to South American beans if the harvest in Brazil and Argentina remains within our expectation,” said Jack Larimer, senior research analyst at Commodity Insights.

China’s diversified import sources and the record production expected from South America suggest that the overall supply outlook remains stable.

Demand coverage

Considering higher production volumes in South America, Chinese traders have decided to take on positions, as evident from the demand coverage for February to April shipments.

Lower flat prices for South American soybeans have incentivized crushers, as they are able to sell soybean meal and oil products to secure margins for deferred volumes.

However, for nearby shipments, buyers are geared toward inquiries for late January shipments of Brazilian soybeans, diverting demand away from the cheaper US-origin soybeans despite already weak margins.

“Buyers continue to inquire and book cargoes for deferred shipments coverage, worsening spot crushing margins and weak domestic consumption pattern are the main issues,” a Chinese broker said.

Bearish feed demand outlook

The soybean demand outlook for China in 2025 indicates moderate growth, driven by increased demand in the poultry and aquaculture sectors, a recovery in swine feed demand and a rise in food use and soybean oil consumption.

Broiler producers have faced low profits since mid-August and weak meat consumption trends have reduced pork demand ahead of the Lunar New Year.

These factors suggest a bearish feed demand outlook for Q1 2025. But recovering hog prices and increased poultry and aquaculture demand may provide some support.

“Meal sales have been pretty slow overall for the year, but animal rearing margins have improved year on year. I think domestic demand should at least remain stable [for soymeal],” a Chinese crusher said.

“If average run rates were to increase to 65%, soymeal premiums would crumble,” said an East-China crusher.

In December, soybean meal prices hit new lows, prompting cautious purchasing amid fears of further declines. Facilities are buying soybeans only for immediate needs, anticipating price reductions from South American harvests.

China’s soybean imports are projected to fall by 1.8% year on year to 109 million mt in MY 2024-25, according to Commodity Insight data.

“We expect Chinese import demand to decline slightly next year amid slowing growth in Chinese crush demand and deteriorating trade relations with the US,” Larimer said.

A weaker-than-expected crush rate implies softer physical demand despite favorable crush margins. Commodity Insights forecasts a 0.51% year-on-year increase in soybean crush volume to 98 million mt in MY 2024-25.

Domestic crushing rates remain in the high 50% range of total capacity, with crushers not optimistic about higher operational rates.

Rising crush margins may further increase China’s crush and import demand despite ample reserves.

“If there is a full-on US-China trade war, we would expect Chinese imports to fall to their crush demand level, which is currently estimated at 98 million mt,” Larimer said.

China would be better positioned to mitigate risks from a possible trade conflict with the US with a stable soybean supply, declining global soybean prices, ample reserves and weak short-term demand.

Tags: China, prices, soybean