China imports will keep US soybean market on its toes

Updated 12 September 2016

China imports will keep US soybean market on its toes

CHICAGO: When it comes to assessing demand for US soybeans, never underestimate the Chinese.
China's penchant for the oilseed has mushroomed in recent years, complementing growth in the country's livestock sector, particularly meat. As the world's largest soybean consumer, China will use over 40 percent more soybeans than the world will have in storage next year.
The United States just began its 2016-17 soybean marketing year, and China will have a big say in how much supply is left over at the close of next August.
The increasing likelihood of a record-large soybean crop in the United States, one of China's key suppliers, may have at least temporarily masked some of the risk to the domestic balance sheet.
Analysts expect US soybean production to increase in Monday's US Department of Agriculture supply and demand report, but they expect 2016-17 ending stocks to remain relatively unchanged near 330 million bushels.
Although this reflects that huge yields will be offset by increasing demand, there is the potential for demand to pull US soybean inventory even lower throughout the next year if China's recent habits remain the same.

In 1996-97, China imported just over 2 million tons of soybeans and a decade later this figure had climbed to 29 million tons.
The US Department of Agriculture has projected China to import 87 million tons in the 2016-17 marketing year, which will begin on Oct. 1. This is the equivalent of 3.197 billion bushels, and for comparative purposes, the United States produced 3.929 billion bushels of soybeans last year.
To put China's massive soybean demand trend into perspective, the East Asian country now accounts for nearly two-thirds of the world's imports of the oilseed. When subtracting China from the mix, the global soybean import trend over the past 20 years is practically rendered flat.
As the world's two biggest soybean producers, the United States and Brazil are naturally China's primary suppliers. Over the last couple of years, the two countries have been responsible for 85 to 90 percent of China's total soybean imports.
Not surprisingly, China buys the majority of soybeans that Brazil and the United States export. In 2014-15, some 72 percent of Brazil's shipments were imported by China, and the corresponding figure for the United States was 59 percent.
The United States supplies the first half of China's marketing year while Brazil takes over the second half. Peak soybean shipments from the United States to China occur around December, and Brazil will peak between April and May.

In May 2014, the US Department of Agriculture placed Chinese soybean imports for the new 2014-15 marketing year at 72 million tons. At the conclusion of the season in late 2015, China had actually imported 78.35 million tons.
In May 2015, the initial estimate for the nearly completed 2015-16 year was 77.5 million tons. As of last month, USDA expected that China will import 83 million tons of soybeans in the current marketing year.
The lesson? China's soybean appetite seems limitless, as its annual imports have been significantly underestimated in the past two years.
The difference in the initial and final Chinese soybean import figures from 2014-15 was 233 million bushels, very close to the 255 million bushels that the United States is estimated to have left over after its recently concluded 2015-16 marketing year.
China may not reach 83 million tonnes in 2015-16, though, as Shanghai-based analyst JC Intelligence Co Ltd. (JCI) said on Thursday that September soybean imports may fall below 6 million tons.
This would be well below last September's 7.3 million tons.
Through August, China has imported 76 million tons of soybeans. But even an optimistic assumption of 6 million tons imported during September would land the final volume about 6 percent higher than the initial assumptions — a difference of 165 million bushels.
The brief slowdown in imports should be only temporary, according to JCI. Chinese demand for US soybeans received a boost last week as a delegation of buyers signed agreements to purchase nearly 4 million tons at a signing ceremony in Indianapolis.
In the United States, about 41 percent of the expected soybean export volume for 2016-17 has been booked through Aug. 25. This rate is very comparable to previous years and implies that US soybean shippers are about to get pretty busy in a couple of months, especially if sales continue on a strong course.
Maybe it is hard to imagine that China's potential 87 million-ton haul could edge much higher over the next year or so, but then again, it was probably difficult to fathom a volume over 30 million tons just a decade ago.
Of course, Brazil's harvest early next year will be crucial in just how much of the oilseed China can acquire, as well as the timing and the source. But the United States will take the leading role in supplying China with soybeans for at least the next six months, and it is a good idea to pay attention because increasing Chinese demand could cut down US supply in a jiffy.

— Karen Braun is a Reuters market analyst. Views expressed are her own.

Saudi business chiefs back 2020 budget

Updated 18 min 49 sec ago

Saudi business chiefs back 2020 budget

  • 2020 spending plan hailed as a positive driver in boosting country’s economy

RIYADH: Saudi businesses have welcomed spending plans of SR1.02 trillion ($272 billion) next year, announced by King Salman.

The Council of Saudi Chambers praised the efforts of the monarch, Crown Prince Mohammed bin Salman and others in reaching an agreement on the 2020 budget.

The government has predicted revenues of SR833 billion and a deficit of SR187 billion for next year, considered an indicator of the success of the Kingdom’s economic policies amid a bleak global economic backdrop.

Chairman of the Council of Saudi Chambers Dr. Sami Abdullah Al-Abaidi said that the Saudi business sector was optimistic about the new spending plans.

“These figures reflect the effective impact of the economic reform measures, the economy’s restructuring and diversification of sources of income,” he added.

Al-Abaidi praised the king and the crown prince for supporting the Saudi economy through numerous projects and initiatives aimed at boosting the business sector.

He said the most notable were business performance improvement initiatives, privatization, private-sector stimulation and local promotion programs.

“This has paved the way for the Kingdom to get the best international classifications, including its first world ranking in business environment reforms, which made it a hub for investments,” Al-Abaidi added.

The business chief reiterated King Salman’s determination to continue implementing reforms, diversifying sources of income, making optimal use of resources, empowering the private sector, and improving transparency and efficiency in government spending to boost growth rates.

“These trends are one of the most important requirements for achieving the Kingdom’s Vision 2030,” he said.

The council’s vice chairman, Muneer bin Saad, said the budget for the new year focused on investing in the human element and sectors that directly affected the lives of citizens, including the development of services.

Saad added the monarch had directed to extend the disbursement of the cost of living allowance until the end of 2020.

Council member Abdullah Al-Odaim said the budget met the expectations of Saudi citizens, and strengthened the confidence of international investors, as figures showed the determination of the state to move forward in its policies to raise the efficiency of government spending.

They also showed increases in non-oil revenues, projected to grow more in light of the improvement of economic activity.

The delegated secretary-general of the Council of Saudi Chambers, Hussain Al-Abdulqader, said the Saudi business sector welcomed the budget which through
its projects and programs would help improve investment opportunities as well as the Saudi economy, ultimately strengthening the Kingdom’s global economic standing.