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.

CHINA BY THE NUMBERS
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.

LITTLE INCREASES ARE HUGE
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.


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.