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Soybean Slides Despite China’s Buying Spree

April 24, 2020 at 16:33 by Andrew Moran

Soybean futures are dropping to close out the trading week, despite China going on a buying spree in recent days. The agricultural commodity has had a rough beginning to the year, affected by a wide range of developments, from the coronavirus pandemic to supply and demand woes. Can prices return to their 2020 peak of $9?

July soybean futures tumbled $0.0575, or 0.68%, to $8.4075 per bushel at 16:16 GMT on Friday on the Chicago Board of Trade (CBoT). Soybean is on track for a weekly dip of 0.25%, adding to its year-to-date decline of more than 12%.

According to the US Department of Agriculture (USDA), China agreed to purchase 136,000 tons of American soybeans as the world’s top consumer is looking to restock its inventory of the staple to avoid any supply chain disruptions. Importers are also taking advantage of low prices amid the broad-based commodities selloff.

Beijing has been buying US soy for three consecutive days, booking a total of 606,000 tons for the 2019–2020 marketing year. But China is planning to buy about ten million tons more in the coming weeks, plus 20 million tons of corn and one million tons of cotton.

In total, China could scoop up more than 12 million tons of soybeans by the time the current marketing year is finished in September. Last year, China purchased just under 13 million tons.

In other industry news, Brazilian farmers’ shipments to China have been largely unaffected by the COVID-19 crisis. The Brazilian Association of Vegetable Oil Industries (Abiove) is maintaining its forecast for both the nation’s harvest and its exports to the world’s second-largest economy – China accounts for 75% of its soybean exports.

Daniel Amaral, Abiove’s chief economist, told Xinhua:

Brazil is striving to supply its domestic market and also guarantee its exports. All of the coronavirus prevention measures in the country are not causing any problem for soy exports. Sales to China continue in an expansive way.

International trade in soybean will expand again. Brazil’s sales to China are constantly evolving. In 2014, they stood at 32 million tons. In 2018, they stood at 68 million tons and in 2019, at 58 million tons. For 2020, we estimate somewhat over 55 million tons. Brazil is a historic and strategic partner for China in the realm of soy.

Meanwhile, Japan is expected to import more soybeans over the next two marketing years as it recently struck a deal with the US, Brazil, and Canada. Tokyo is projected to import 3.386 million tons in 2019–2020 and 3.405 million tons in 2020–2021.

In other agricultural commodities, July corn futures slipped $0.0425, or 1.3%, to $3.2175 a pound. July wheat futures slumped $0.0825, or 1.51%, to $5.3625 a bushel. July orange juice futures surged $0.011, or 1.02%, to $1.0885 per pound.

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