Brazil share of China soy import market hits 53% in 2017: data

Brazil’s share of the lucrative and expanding soybean market in China grew to above 53% in 2017, as better quality beans and a huge Brazilian crop sent buyers away from the US.

According to Chinese customs data, Brazil's exports to China rose 33% on the year to almost 51 million mt.

That is out of a total of 95.5 million mt and compares with US exports of 32.8 million mt, down 3.8%, and Argentinian exports of 6.5 million mt.

“Price and protein” were the reasons, according to Eduardo Felau, a broker with Brazil-based brokerage Zairam Commodities.

“The Chinese favour our soybeans due to the higher percentage of protein,” he said adding that protein levels of Brazilian beans last year were 37% versus 34% in the US.

China imports around 60% of the world's soybeans, mainly for animal feed.

Higher protein in feed leads to higher growth rates in animals such as chickens and pigs and is favoured by farmers.

However, US protein in soybean has been in a downward trajectory for six years – falling from 35.3% in 2012 to 34.1% in 2017, as farmers have preferred seed with a higher yield rather than higher protein as they generally get paid by weight.

The two characteristics are negatively correlated.

Huge crop

Prices of Brazilian beans were also increasingly competitive due to a perfect growing season last year that boosted production.

Last year, Brazil production of soybeans reached 114 million mt, the largest on record, which meant farmers could continue to export to China in months that were traditionally dominated by sales from the US.

In December, Brazilian exports of beans reached 2.36 million mt, four times as much in December 2016, while in the first two weeks of January 2018 it exported almost 700,000 mt, just 200,000 mt short of total exports for January 2017.

“It’s been huge and unheard of, but next year looks the same,” said a second broker who spoke on condition of anonymity.

Most analysts predict that Brazil will produce 112-114 million mt in this growing season, falling just short of last year’s crop.

While that comes at a time when China’s demand for beans is expected to rise 5% to 100 million mt, according to the country’s Grain and Oil Information Centre, new quality restrictions on US beans heading to China may push up prices of US exports and impact their market share further.

From January this year, any US cargo that has more than 1% foreign matter must be clearly identified as such and will be subject to further inspections in China.

That, sources say, will lead to additional inspections taking place in the US and adding up to 15 cents a bushel ($5/mt) on the cost.

Currently, Brazilian beans are competitive into China, with FOB rates at around $388/mt FOB Santos and freight of around $33.50/mt – $421.50/mt CIF China equivalent – versus $380/mt US Gulf and freight of $42.50/mt – $422.50/mt CIF.