China weekly soybean cargo buying at 4-wk high despite low margins

Soybean cargo purchases by Chinese crushers rebounded further last week to reach up to 16 cargoes as demand for early loading US soybeans and 2021 new crop Brazilian beans continued despite weak crush margins, according to Agricensus data.

Crushers last week booked 8 or 9 cargoes of US soybeans out of the Pacific Northwest for shipments between August and October this year and around 7 cargoes of 2021 Brazilian new crops for shipments in the first half of next year, say market sources.

This was the highest weekly volume booked by Chinese soybean crushers in nearly a month as crush margins in China have been hovering at low levels since mid-June this year.

Based on Agricensus calculations, the average margin on shipments of Brazilian soybeans between July and October this year stood at nearly $24/mt during the second week of June 2020, to slide to $10/mt by the first week of July.

Weekly soybean cargo buying fell from around 30 cargoes per week to just 10 cargoes over the same period.

However, average margins picked up slightly last week to reach $13/mt thanks to lower CBOT soybean futures and a stronger Chinese renminbi.

Margins for shipments of soybeans from both the US and Brazil in the fourth quarter of 2020 were largely considered unprofitable though.

Chinese crushers typically need a margin of $15-$20/mt to breakeven on their variable costs.

Purchases in recent weeks were mostly done by large-size crushers including state-owned Cofco and Sinograin as well as international majors such as Wilmar and the ABCDs.

Small-to-medium private crushers in China have been wary of making moves faced with such economics.