Chinese soybean demand shifts, while US exporters eye tariff relief

China's soybean imports surged in July, increasing 18% year-on-year to 11.7 million tons, though current US involvement in the supply chain remains limited due to seasonal factors and persistent tariffs. 

As the world's largest soybean importer, China's demand dynamics are closely watched, with analysts suggesting US exporters face hurdles unless trade agreements lift existing levies.

China’s soybean import figure represents an 18% increase compared to July of last year, though it was a slight decrease from the volume imported in the preceding month, according to customs data.

Supply dynamics

In the first seven months of the year, China’s imports reached 61 million tons, marking a 4.6% increase compared to the same period last year.

Data on the origin of the soybeans is not yet available for July.

Brazil was the likely source of the majority of imports in June, contributing 10.6 million tons, or 87%, of the total.

The share was exactly the same in May.

The United States has not emerged as a major supplier of soybeans in recent times. 

This can primarily be attributed to seasonal factors that dictate agricultural cycles.

The upcoming harvest for the next US crop is not anticipated until the fall, meaning current stock levels are either depleted or unavailable for significant export. 

This seasonal constraint creates a temporary void in the global supply chain, allowing other nations to fulfil demand. 

As such, the US's limited involvement in the current supply landscape is a predictable consequence of its agricultural calendar, rather than a reflection of long-term production capabilities or market strategy.

“If the Chinese import tariffs on US soybeans remain at the current level of 15%, US exporters are likely to find it difficult to sell their soybeans to China,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report. 

Demand set to fall

Looking ahead, the outlook for China's soybean demand suggests a potential decline, primarily driven by anticipated lower feed requirements within the country. 

This shift could stem from various factors influencing the nation's agricultural and livestock sectors. 

For instance, a decrease in the pig population, a significant consumer of soybean-based feed, could directly translate into reduced demand. 

China reportedly intends to reduce its breeding sow population by 1 million to stabilise plummeting hog prices.

The sector is suffering from overcapacity and weak demand. A meeting of industry representatives is therefore scheduled for next week.

“The outlook for soybean prices, which slipped to a four-month low of 980 US cents per bushel this week, is therefore bleak, especially as large harvests are expected in the US and Brazil,” Fritsch added.