RPT-COLUMN-Brazil’s intrusion on US soy exports to China somewhat mimics trade-war era -Braun

Repeats column first published on Friday. The opinions expressed here are those of the author, a market analyst for Reuters.

By Karen Braun

NAPERVILLE, Illinois, March 22 (Reuters) - Despite economic concerns, Chinese agricultural demand is expected to remain strong this year, particularly when it comes to imports of bulk commodities like soybeans, corn and other grains.

Brazil has been increasingly capturing that business at the expense of U.S. exporters. Chinese customs data this week showed a huge surge in Brazilian soybean arrivals in January and February despite a five-year import low for those months.

But beyond the large Brazilian volumes, the timing of these shipments has also encroached on the export of U.S. soybeans, by far the most profitable U.S. agricultural export, and China has yet to express interest in the upcoming U.S. bean crop.

INTRUSION

Brazil this year was out-shipping U.S. bean exporters on cargoes to China at various points during the peak U.S. shipping window, the first such occurrence outside of the trade war. More than 60% of annual U.S. soybean exports occur between October and January, when Brazilian bean supplies are presumably low.

This year, U.S. bean exports to China totaled 17.5 million metric tons during that four-month period, only 2.8 million more than Brazil. That gap in recent years, outside of 2018-19 and 2019-20, would be at minimum 13 million tons and possibly up to 25 million.

Brazilian bean volumes to China were larger than U.S. ones during both November and December 2023, -peak months for U.S. exporters. Of the U.S. and Brazilian beans shipped to China between October and January, some 46% were Brazilian, up from 29% two years earlier.

This has been possible because Brazil’s soybean crop in the last few years has grown at double the rate of Chinese soybean consumption, meaning Brazil can be more of a full-year supplier than previously.

Heavier reliance on a single customer is risky, though the larger off-peak volumes to China have yet changed Brazil’s export makeup. Some 73% of all Brazilian bean exports in calendar-year 2023 went to China, consistent with other recent years.

U.S. exporters are feeling China’s absence, as total October-January shipments were a four-year low, down sharply from the prior year. Some 63% of all U.S. soy exports in that window were to China, below a -trade war average closer to 68%.

China seems to recognize the risk of relying on a single supplier, as media reports this week suggest Beijing may ask domestic crushers to prioritize local beans to reduce dependence on imports.

But China is also investing in South American port infrastructure. Brazil last week expressed interest in exporting goods through Chinese-controlled Chancay port in Peru, set to open at the end of this year. That could cut two weeks off the transit time for Brazilian shipments to China.

NO NEW CROP

The U.S. Department of Agriculture’s Beijing attache this week projected Chinese soybean imports for the upcoming 2024-25 marketing year will remain strong, similar to current levels. But U.S. beans are yet in the plan.

As of March 14, China had U.S. cargoes on the books for shipment in 2024-25, starting Sept. 1 for U.S. beans. Only about 350,000 tons of -crop beans had been booked to all destinations, the lowest for the date in 17 years.

In -trade war years, China would usually have some -crop U.S. coverage by , so the recent trend is unsettling. But concerns should escalate if more volumes are realized within the eight weeks or so.

U.S. exporters on Wednesday sold 120,000 tons of U.S. soybeans to unknown destinations for 2024-25 delivery. That was the second daily sale of 2024-25 beans following the 125,000 tons sold to unknown in mid-December.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Writing by Karen Braun
Editing by Matthew Lewis)

((karen.braun@thomsonreuters.com; X: @kannbwx))