China Soy Imports Slide Due to Multiple Factors

China's decline in soybean imports during Q1 2019 soybean market is due to weak fundamentals, including impact of African swine fever, the overhang of large U.S. inventories and expanded plantings in South America, according to an article in the country's Grain and Oils News this week.

Customs data reported China's March soybean imports totaled 4.9 million metric tons (mmt). The Q1 2019 soybean import total of 16.75 mmt was down 14 percent from a year earlier. Meanwhile, imports of fats and oils for the quarter totaled 1.96 mmt, up 48 percent from a year earlier.

Noting a slow-down in purchase of oilseeds, fats and oils, a COFCO manager said, "Our country's growth in oilseed purchases has reached a turning point." The COFCO manager said slow soybean purchases are due to the lowest crushing margins in years, low soybean meal basis, exchange rate factors, and slow downstream business activity.

A manager with feed company Haid Ltd. said multiple difficulties have come to bear on soybean prices, including African swine fever, China-U.S. trade tensions, and expansion of soybean production in South America.

According to Grain and Oils News, China's Feed Industry Association estimates that 2019 feed production will be down 1-to-2 percent and 2018/19 consumption of protein meals will be down 4-to-6 mmt due to the influence of African swine fever.

The decline in China's soybean meal market is attributed to global excess supply of soybeans, the possible resolution of China-U.S. trade tensions, declining profits for hog farms, and import of substitute meals to replace soybean meal. This triggers a "chain reaction" that affects soybean imports, the article said.

The United States is still holding large inventories of soybeans while South America is set to have a big crop, adding downward pressure on prices, Grain and Oils News said.

One trader who did not give his/her name told Grain and Oils News that China's consumption of protein feed was already waning when African swine fever broke out last August. Swine disease compounded the slide in feed demand, causing the decline in soybean imports.