China uses more wheat and signals lower soybean purchases from Brazil

RIO DE JANEIRO, BRAZIL – The Chinese government has put huge volumes of cheaper state wheat up for sale so that feed producers can replace costly domestic corn. More than 24 million tons of wheat has been sold from reserves this year, and the volume is expected to increase between 40 million to 50 million tons in the current season ending in May, according to the China National Grain and Oil Information Center (CNGOIC).

With this amount of wheat, with 4% higher protein content than corn, the use of soybean meal may fall by up to 2 million tons, or the equivalent of 5 million tons of soybeans, according to Lin Guofa, senior analyst at Bric Agriculture Group. The government will continue to sell state rice at the same time and reduce the volume of wheat until May, the wheat harvest period in the country, Lin said.

That could reduce China’s estimates of soybean imports, which hit record highs last year to feed the replacement pig herd after the impact of African swine fever.

The buying spree has boosted global prices amid investor concern about supply. Grain prices rose again this week as the US forecast for the coming planting season came in below expectations. Some analysts say the estimates for soybeans are too low considering strong Chinese demand.

With new cases of African swine fever, weaker demand for meal has resulted in a 25% drop in soybean crush in recent weeks from a high of 2 million tons per week recorded last year, said Hou Xueling, analyst at Everbright Futures.

The low crush volume has caused shortages of edible oils and may increase imports of products such as soybean oil and rapeseed oil, Hou said. She expects demand for soybean meal to improve in the second half of the year.

China’s total purchases of soybeans will remain high. Imports should recover in April after large shipments from Brazil, the country’s main supplier, according to the CNGOIC. March shipments were estimated at 6.2 million tons, up from 5.56 million in February, which was the lowest level in a year.

The center expects annual imports to be flat in 2020-21 from 98 million tons a year ago.

Source: Moneytimes

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