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Soybean Falls As Chinese Imports Slip on Weak Feed Demand

July 9, 2019 at 14:15 by Andrew Moran

Soybean futures are sliding on Tuesday after the US government reported that Chinese imports tumbled in the 2018–2019 and 2019–2020 seasons. The obvious culprit would be the ongoing tit-for-tat US-China trade war, but experts say that lower feed demand and rising domestic production are two key factors. Soybean’s losses were capped on a crop condition report that suggested US output was lagging behind markets.

November soybean futures fell $0.03, or 0.33%, to $8.9475 per bushel at 13:57 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean prices have pared much of their 2019 losses, thanks to a stellar 4% performance in the last month. On the year, the agricultural commodity is flat after plunging as much as 10% in May.

According to the US Department of Agriculture (USDA)’s Global Agricultural Information Network report, soybean meal consumption for feed is projected to come in at 65.7 million tonnes in 2018–2019, a drop of 3.3 million tonnes. The USDA forecasts that soybean meal feed could slide another two million tonnes in the 2019–2020 season.

Industry observers say that these figures are still reasonably high, considering how the country has been plagued by African swine fever outbreaks that have decimated its sow and hog inventories by as much as 70%. Some say that Chinese farmers could transition from food waste to manufactured feed, which might translate into better-than-expected demand for US soybeans.

Darin Friedrichs, senior Asia commodity analyst at INTL FCStone, told CNBC:

The soybean crushing rate and soybean demand is down compared to last year at this time, but is still surprisingly strong given how many hogs China has lost.

If China loses about 40% or more of their hogs, we would normally assume soybean demand would be down a large amount as well. At this point it’s maybe only down 5–10% or so which is surprising.

Researchers do note that government subsidies have boosted domestic output by nearly 6% to 16.8 million tonnes. As part of a five-year plan to depend less on foreign markets, Beijing has subsidized rural communities to expand soybean acreage, though efforts have curtailed as farmers report that these funds just cease sporadically.

Meanwhile, the USDA’s latest crop condition report rated that 53% of soybeans as good-to-excellent, which is down 1% from the previous week’s numbers. This shows that supplies are falling behind market projections, a positive trend that might reduce inventories in domestic and global markets.

In other agricultural markets, August corn futures plummeted $0.09, or 2.03%, to $4.3475 per pound. September wheat futures slumped $0.095, or 1.86%, to $5.015 a bushel. September orange juice futures cratered $0.015, or 1.42%, to $1.0405 a pound.

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