Cofco, Sinograin snap up South American soybeans as trade talks rot

Sinograin and Cofco have started to aggressively snap up South American soybean supply with at least eight cargoes being bought up from Argentina and Brazil in the past five days for nearby loading on fears that stocks could dwindle.

Five China-based market sources told Agicensus on Friday that the two-state-owned buyers had been sitting on their hands and avoiding contracting South American beans as they were waiting on a political signal to buy millions of tonnes of US soybeans.

However, last week’s breakdown of talks between the US and Chinese governments has dashed hopes of a resolution that could reopen Chinese markets to US supply, and has thus changed that dynamic.

“Sinograin and Cofco resumed buying a large amount of South American beans recently because they had previously saved capacities hoping to buy US beans once the [trade] talks are done. Hence, they did not buy enough beans for front-months,” said one market source with knowledge of the matter.

China’s government had pledged to buy 20 million mt of US soybeans as a goodwill gesture to kickstart trade negotiations with the US.

But with only 12.5 million mt contracted – and a large part not expected to arrive until later than August – Cofco is now believed to be short beans.

“I heard they were forced to buy Brazil. The earliest vessel arrivals (if bought now) will be July 9th. Their supply could be cut out by the end of June,” said a second market source.

"Cofco apparently bought 4-5 cargoes on CFR basis on Thursday", the same source added.

Cofco has been active in the market this week with several deals reported out of both Argentina and Brazil on both an FOB and a CIF basis – a dynamic that has seen Brazilian soybean prices rally 7% in the last week.

Out of Argentina, Cofco bought a cargo at 46 c/bu over futures on Thursday, equivalent to $325/mt and up 6% on the week.

While out of Brazil several deals were heard on a CFR basis at 177 c/bu over July futures for June loading and 6 cents higher for a cross month shipment for June/July equating to $373-375/mt CFR North China, also up 6% on the week.