The preliminary Chinese trade data released on Friday showed soybean imports for the month of November at 8.68 MMTs. That figure was just over 1 MMTs short of what had been expected based on October exports from major soybean producing states; though, the difference will be rolled forward into December. October and November imports were both record large, and a record large import total near 10 MMTs is expected to be confirmed for December. This would be put Oct-Dec imports at a record large 24.5 MMTs, or an 11% increase over a year ago. In the November WASDE report, the USDA raised their forecast for annual imports to 97 MMTs. The chart plots the relationship between Oct-Dec and annual imports, which suggest that the November increase was justified, and that China is on track to a record large import total.
And while there has been persistent worry that Chinese importers have overbought or are importing soybeans far faster than needed, the latest crush data shows that processors are working through supply at a record rate. Soybean crush last week was estimated at 1.96 MMTs and marked the 3rd consecutive week above 1.9 MMTs. 10 weeks into the crop marketing year, the cumulative crush total is estimated just short of 18 MMTs, or 106% of last year. The chart plots the relationship of cumulative crush rates against the annual crush totals according to the USDA. The 17/18 estimate was increased to 95 MMTs in November, up 1 million from the October forecast and an 8% increase over last year. To date, processors look to be on track to reach that target on strong domestic feed demand.
The Chinese pork industry is the largest consumer of soymeal, but reconciling government inventory data against implied feed demand has been one of the greatest challenges for analysts. The Ministry of Agricultures (MOA) offers monthly estimates of changes in inventory versus both the previous month and year, but does not provide an actual census. The chart shows that according to the MOA, that both the market hog and sow inventories have marked year over year declines, every single month since 2014. The latest available data is for August, which shows that the market hog inventory was down 5.6% from a year ago, with the sow herd down 4.7%. Yet somehow, soymeal demand continues to increase, while hog production margins estimates have been positive every single month since January 2015. Our best guess is that the shift from backyard to commercialized farming practices explains some of the discrepancy between lower inventory and higher feed demand.