Preliminary January Chinese Trade data showed that China imported 7.4 MMTs of soybeans. The figure was well above expectations as several cargos of Brazilian beans that were held up by CIQ inspectors in December were finally released. The by country break down will not be released until later in the month, but based on shipments from major exporting countries, we expect that the majority of the January soy import total was sourced from South America.
The US soy loadout program to China began in January as S American exports declined. And offloading slowed during the Chinese New Year holiday.
0ur best guess for Feb imports is 5.1 MMTs, which if realized will be just under last year and would put the cumulative import total to date at 30.5 MMTs.
In the February WASDE, the USDA lowered their estimate of annual Chinese soybean imports by 2 MMTs to 88 MMTs. ARC research argues that the China 2018/19 import estimate is still too high. When the USDA was compiling their estimates, there would have been just three months of official trade data available. With four months of data available and some vision for Feb imports, the USDA’s forecast looks to be 4-6 MMTs too high. An annual China import total of 82-84 MMTs seems more reasonable based on ARC pace analysis.
Assuming ARC’s estimate for Feb imports, China will need to import 57.5 MMTs from Mar-September. In a comparable time last year, China imported 56 MMTs and in 2017 they imported 58 MMTs. This is needed to validate the WASDE 88 MMTs import forecast
In 2017 & 2018 Chinese feed demand (as measured by soy crush) was rising. Soybean crush so far is down 8-10% year-over-year, which diminishes the odds of stronger imports into June.
Chinese crush rates peaked in early October and had been trending lower since. Ahead of the New Year holiday, crush rates first spiked in late January, and then slipped to a new low ahead of the week-long celebration.
The cumulative crush to date is down 10% year over year but is also the 2nd largest on record due to the strong early season total.
Record large weekly meal stocks have weighed on processing margins and slowed crush. However, estimates of China’s soymeal stocks turned down in late January and then fell for three consecutive weeks.
Chinese soymeal stocks for the 1st week of February were back in line with the five-year average. The next several weeks should provide a clearer picture of current Chinese feed demand. But at this point, it looks appears that AFS is holding down China’s domestic feed demand.