Analysis: China

World Soymeal Consumption and Trade

Jan 29, 4:57 pm | Brazil, Soybeans, China, Argentina

While the CBOT Ag Trade has been intently focused on world soybean production and trade over the last 6-8 months, world soymeal demand has continued to expand. The chart reflects the USDA’s December estimates that called for total world soymeal demand to increase by nearly 10 MMTs in 2018/19. Chinese meal consumption is expected to rise by 2.2 MMTs (3%) this year, while the rest of the world consumption is seen increasing by 7.8 MMTs (5%). If correct, this will be the 10th consecutive year that world meal demand has increased!

  At this time, there is enough import and crush data available from China to justify lowering estimates for China. Feed demand appears reduced amid the African Swine Fever outbreak. But all indications from world trade look to be supporting the USDA’s forecast for higher meal consumption for other non-Chinese consumers.    




Argentine meal exports have been slow all season due to last year’s drought-reduced crop. However, meal production and export totals have recently improved as US soybeans have been imported and crushed. Oct-Dec meal exports of 5.8 MMTs were down 5% from last year and the slowest quarterly figure in 4 years.  

  Brazil was able to capture some of the lost Argentine export business, and quarterly exports of 3.8 MMTs were up 27% year over year – record large.

  Official US export data for November has been withheld, as has weekly data for the last half of December, due to gov’t shutdown. However, there was enough weekly export data released to estimate Nov and Dec exports. We estimate a quarterly US export total of 3.4 MMTs, which if confirmed would also be a record.

  We estimate combined US/BR/AR quarterly meal exports were up 37% year over year, at a record 4.6 MMTs. Note that this would be the 2nd consecutive year that the US was able to capture a larger share of the combined world meal trade.

The USDA has long held a forecast for increased world soymeal trade, which up until recently seemed somewhat optimistic. The December WASDE report estimated total world soymeal imports at a record large 62.5 MMTs – up 4% from last year. But with a full quarter of export data available from the principle soybean meal exporting countries, the USDA’s long-held 62+ MMT trade figure  appears to be reasonable.

  The US, Brazil, and Argentina, collectively account for 85-86% of total world soymeal trade. The chart plots the relationship between 1st quarter exports and annual world imports. USDA forecasts call for an increase in soymeal demand in every region of the world in the year ahead. The largest increase of 1.4 MMTs is forecast for South Asia, followed by a 1.3 MMT increase in N America. EU meal consumption is seen growing by 1.3 MMTs.

  US/world soy markets remain focused on the US/China trade. But world feed demand (outside of China) is expanding which will  support global soy crush rates.

Chinese Soybean Import and Crush Update

Jan 14, 1:37 pm | Soybeans, China

Preliminary trade data from Chinese Customs showed a December soybean import total of 5.72 MMTs. The figure was down 3.8 MMTs from last year, and it was the smallest December import total since 2011. Based on major exporter’s shipment data, we estimate a further decline for January imports to just over 4 MMTs. Assuming that estimate, soybean imports in the 1st four months of the year will amount to 22 MMTs and be the lowest in 6 years. The current pace is behind schedule to reach the USDA’s import projection figure of 90 MMT’s. But if the gov’t decides to lift tariffs AND increase state buying of US beans, the 90 MMT forecast could be reached.

While China’s soybean import rate has been slowed due to the country’s ban on US soybeans, there is some evidence that China’s domestic demand for soybeans/meal has been slowed. Estimates for soybean crush rates spiked in early October, but weekly processing rates have been well under a year ago since November, and most recently have been under the 5-year average. The Dec WASDE estimated an annual crush figure of 92.5 MMTs, and the current crush pace argues that figure could still be too high. Chinese soymeal demand appears to be down, and annual crush estimates are likely to decline.  

While China’s soybean crush rates have held below last year over the last three months, estimates of Chinese soymeal stocks have held at historic levels since the start of the crop marketing year. Stocks estimates marked a seasonal low in early October and had since trended higher. Estimates for last week put stocks just over 1.1 MMTs, the largest figure for this year and 21% more than the same week last year. Building stocks have weighed on cash soymeal prices, which have dropped 23% from the October high and pulled estimated crushing margins lower. Estimated margins this week at -420 CNY/MT is just above the low that was marked at the December and the worst margins since 2014.

  Slow crush rates, building stocks, and negative crush margins are likely the best indication of reduced feed demand. Whether this is due to the substitution of other feed products or caused by lower hog herds due to the AFS outbreak is not clear at this time.   

Chinese Soybean Crush and Import Update

Dec 10, 4:33 pm | Soybeans, China


China reported monthly soybean imports for November at 5.38 MMTs of soybeans, which was right inline with expectations. However, it was a 3 MMT decline from last year and the lowest November import rate since 2012 (largely due to virtually no imports from the US). Based on November export data, we expect that a similarly slow import trend will continue into December where we estimate  total imports of 5.7 MMTs. This puts Oct-Dec imports at 18 MMTs or the slowest in 5 years. The current import pace suggests that the USDA’s 90 MMT forecast is not likely to get any larger – if China’s ag import tariffs stay in place.

Chinese crush rates have held up relatively well, but are below a year ago. Weekly processing rates have held around 1.7 MMTs, with last week’s crush estimate of 1.75 MMTs the largest in 5 weeks. The cumulative soybean crush rate is just under a year ago; though, the USDA is projecting that the annual crush will increase 2.5 MMTs this year to a record large 92.5 MMTs.

  The current pace is on track to reach that target – but the outlook for the next year for both imports and crush remains highly speculative amid ongoing US/China trade negotiations.

The chart plots the spread between Chicago soybean futures prices and China’s Dalian soybean product futures values (in Chinese yuan). The spread soared to historic highs through last summer. The US soybean market forged a secondary low in September, while the Chines soy product markets scored significant highs in early October and the spread has collapsed over the last several months. Forward spreads are even worse as the US soybean market maintains large carries, while the Chinese soymeal market remains in a state of backwardation.

  Spot Chinese soymeal futures have dropped 22% in just 2 months, while May soymeal is another 21% under January. It’s been a historic collapse in the China’s soymeal futures – whether this is reflecting expectations of sharply reduced feed demand (due to ASF) or an influx of US soybean supplies is unknown?

  For weeks, the Chinese and South American soy markets have been forecasting a easing of US/China trade tensions. To expand total Chinese imports would require the Gov’t to secure soybeans for their reserve.  


Chinese Soybean Import and Crush Update

Sep 11, 4:11 pm | Soybeans, China

Preliminary trade data from Chinese Customs, reported late last week, showed that China imported 9.15 MMTs of soybeans during the month of August. The total was well above expectations and also a record large figure for the month of August. Monthly import totals throughout the summer have continuously fallen short of estimates based on export totals from major exporters. Cumulative imports through August total 86 MMTs – leaving a balance of 11 MMTs that need to arrive in September, to reach the USDA’s 97 MMT forecast. At this point, it’s unlikely that forecast will be reached. The chart plots monthly import estimates, based on shipments from major world exporters and actual reported imports. Through August, there was a more than 2.7 MMT gap between exports to China and the official Chinese import figures. Based on the data, we expect that Sep imports could reach 7-9 MMTs, which would put annual imports at 93-96 MMTs.

Early year Chinese soybean crush rates have been well above average, but have have been lackluster since the New Year Holiday break in late February. Weekly crush rates since March have averaged 1.66 MMTs/week versus 1.72 MMTs a year ago. Domestic demand remained slower as estimated hog producers margins fell to multi year lows through the first half of the year.

 Chinese hog margins bottomed in late June and have since turned higher as Chinese pork and cash hog prices have rallied. The hope is that higher prices will restore feed demand.

  However, the largest unknown for the Chinese feed and pork industry is the extent of loss that has developed amid the African Swine Fever outbreak. Based on cumulative crush rates, the USDA could lower their annual crush forecast by 2-3 MMTs in the Sep or Oct WASDE reports, which will further add to the world old crop soybean carry out.

China’s tariffs on US soybeans has redirected trade as prices have been hugely distorted. US soybean prices have been pushed to artificially low level in the world market, while Brazilian and other S American origin prices have increased by a proportional amount. This has been a boon for US and world soybean processors, though Chinese crushers have been unable to participate in such a move.

 The chart reflects the price spread between Chicago soybean futures and Dalian soy product values – an inexact barometer of Chinese crush margins (from US soybeans). The spread has steadily risen since the tariff announcement, and has continued to gain through the summer. If China were to remove tariffs on US soybeans, the spread would quickly collapse as US soybean prices would soar while Chinese product markets would likely fall sharply, as crushers race to capture margin.


Chinese Soybean Imports In May

Jun 8, 2:08 pm | Soybeans, China

4Preliminary Chinese trade released on Friday showed that China imported 9.7 MMTs of soybeans during the month of May. The monthly total was 1% more than last year, but also a record large May import total and the largest monthly import rate since last July. Based on US/S American exports in Apr/May we look for a similar import figure of 9.6 MMTs in June. Due to slower than expected imports in March and April, traders had started to question the USDA’s long held annual import estimate of 97 MMTs. But if our estimate for June is close, the pace will be right on track to reach the USDA forecast.

5While imports are still on track to reach the USDA forecast, Chinese crush rates have slipped behind schedule. Estimated processing rates in the last 6 weeks have averaged 1.6 MMTs versus 1.8 MMTs a year ago, as crush margins have narrowed. The USDA has held their Chinese crush forecast at 95 MMTs for many months, but due to slower crush rates in recent weeks that forecast now could be 2-5 MMTs too high. There is still more than 3 months left in the marketing year, leaving plenty of time for crush rates to catch up. We doubt the USDA makes any changes to their estimate until later in the summer.

6The slower crush rates look to have largely been due to building soymeal stocks. Hog feeding margins in China turned negative for the 1st time in nearly 4 years in early March, which also coincided with the start of a build up in soymeal stocks. Meal stocks forged a secondary low in early March, and then steadily increased into late April to a record large 1.5 MMTs. This just barely exceeded the previous high that was set last summer, and the large supply took crush margin into negative territory. With slower rates of crush, meal stocks have begun to decline and were estimated at 1.1 MMTs last week. However crush margins are still holding deep in the red, and not likely to improve until meal stocks have been whittled down.

  China is still expected to import record or near record large tonnages of soybeans in June, with imports to seasonally decline in late summer.

Chinese Soybean Imports In April

May 8, 4:56 pm | Soybeans, China, Hogs & Pork

4Chinese customs data showed all origin soybean imports totaling 6.9 MMTs in April. The figure was nearly 1 MMTs less than a year ago, and also fell well short of expectations based on major exporting countries’ shipments. The shortfall is likely due to a number of US vessels that have been quarantined by Chinese inspections. Based on April shipments, we estimate a May import total of 9.5 MMTs. If correct, this would put marketing year imports at 60 MMTs, and still on track to reach the USDA’s long held forecast of 97 MMTs. However, much of this outlook still hinges on a resolution to the Chinese/US trade dispute.


China’s soybean crush rate was record large in the first 5 months of the year, but has been less robust since the New Year holiday. Soymeal stocks have been record large, and estimated crush margins have been back and forth around break even. The weekly average crush rate in the last 9 weeks has been 1.7 MMTs/week versus 1.6 MMTs last year. However, the pace is slowly falling behind what is needed to reach the USDA forecast. ARC estimates a spot crush margin this week of -37 CNY/MT vs -200 CNY/MT a year ago. Moreover, Chinese soymeal stocks have nearly doubled over the last 7 weeks to 1.2 MMTs.


One potential problem for the Chinese soy market is the collapse of both hog prices/margins that has occurred. Market hog prices fell sharply after the first of the year, dropping more than 26% by early March, while last week’s price quotes were 34% under the early January high. Feeder pig prices have followed along, but to a lesser extent. Feeder pig prices last week were 16% lower from the start of the year.

  The lower market hog prices along higher feed costs has drove estimated hog feeding margins deep into the red,  the lowest level since 2014. The 12 province average margin for last week was estimated at -176 CNY/head (-$28). However, the relationship between the Chinese hog industry and feed demand is complex.

  Hog inventory estimates have shown numbers declining in every single month since 2014, yet feed demand (as measured by soybean imports) has continued to increase during that time. Our best guess is that commercialization has led to higher feed demand, with fewer hogs.   


Chinese Soybean Imports in February

Mar 9, 2:19 pm | Soybeans, China, Hogs & Pork

4** Chinese Imports Seasonally Slow In February: Preliminary Chinese trade data was released on Thursday, but was glossed over by the WASDE and Brazilian crop reports. Chinese customs data showed a monthly import total of 5.42 MMTs for February, slightly below last year and a larger than normal seasonal decline. The sharp break was likely due to the New Year holiday occurring in February this year. Based on weekly export shipment data, we estimate a March import rate of 6.8 MMTs, followed by an April import total of 8.6 MMTs. If realized, the marketing year import total by the end of April would stand at just over 53 MMTs, or nearly 4 MMTs increase (8%) over last year. The USDA has held their annual import forecast at 97 MMTs, and the lower chart (which includes Mar and Apr estimates) that the current pace of trade is right on track to reach their forecast. We expect that forecast to remain static into much later in the year. 

5** Soymeal Stocks Decline Post New Year Holiday: Soybean crushing rates have kept pace with the record large import rate, and ahead of the New Year holiday the cumulative crush total was up 14% year over year. The weekly crush was down sharply through the holiday week, and was only 75% of average last week for a weekly total of 1.4 MMTs. The back to back weeks of light operations pulled weekly meal stocks down to a 13 week low, but back in line with the 5 year average. But on return from holiday, Chinese markets needed to adjust to world soy markets that had rallied sharply during the week. Cash meal prices jumped nearly 5% last week, which also lifted estimated soybean crush margins to the highest level in more than a year. This looks to keep processor demand up as large tonnages of both US and Brazilian soybeans arrive in the coming weeks.   

6** Estimated Chinese Hog Margins Plunge In Early 2018:  While soybean imports for crush demand appears extremely robust, the one area of concern within the domestic Chinese market is in hog sector. Domestic cash hog prices have fallen precipitously since the start of the year, with price quotes this week down 26% from the January high and nearly 30% less than a year ago. The chart shows that the drop in market hog values, along with rising feed costs has squeezed estimated feeding margins back near break even levels for the first time in 3 years, with several provinces showing losses for the first time since early 2015. Monthly estimates of Chinese hog inventories have shown a contracting hog herd every single month since Dec 2013, and hog changes inventories have had no measurable relationship to domestic feed demand. This has called into question the accuracy of the government’s estimates. However, the drop in price and the fall in hog margins will be watched for any changes in feed demand in the coming months.

World Wheat Less China

Jan 29, 4:52 pm | Wheat, China

4  World wheat ending stocks have ballooned to a record 268 MMTs! Since 2012, world wheat stocks have risen by an amazing 50%. And since 2015, world end stocks have been pushed incrementally higher in almost every USDA monthly report. As a result, CBOT and world fob wheat prices have been depressed.

  However, China’s share of world wheat stocks has risen incredibly over the last decade, and in 2017 the USDA projects China to hold a record 48% of the world’s total stored wheat supply. This wheat is not in an exportable position, but like Russia, Chinese wheat yields have been rising sharply and at some point, China will have to clear out its inventory.

  The issue ahead is that the market is no longer providing incentive for non US wheat producers to expand acreage. However, we doubt that a substantial decline in wheat stocks lies in the offing. World wheat demand would have to expand for such a stocks decline.

5 Russian wheat yields in 2017 nearly matched those of the west at 45 Bu/Acre, and similar yields can be expected in the years ahead with normal weather. But due to oversupply and a 5% rally in Russia’s currency since early December, Russia’s domestic market in rubles has been weak. ARC doesn’t expect Russian wheat farmers to cut planted areas, but further expansion is unlikely.

   Russian wheat seeding has expanded 9 Mil Acres in the last three years, or roughly 15%. But, with domestic price down 15-17% from a year ago, acreage in 2018 and perhaps beyond will be unchanged.

   The US will plant a bit more spring wheat, Australia will plant a bit more amid rising prices there, but overall the world wheat market is not signaling the need for new global acreage.

 6 ARC projects world wheat area less China at 196 Mil hectares, up marginally from 2017, but well below 2015 & 2016. Then assuming trend yield and trends in consumption (which are mild), the most probable world wheat balance sheet (less China) is below. Domestic food use has shown signs of better growth as emerging economies perform. GDP forecasts for emerging markets in 2018 is rather solid, and places like Latin America and the Black Sea have rebounded particularly well. Higher crude prices will aid purchasing power in North Africa & the Middle East, and so wheat demand growth will continue, albeit slowly. The point is that amid cheap wheat prices and rising food use, world end stocks minus China are forecast at a 6-year low 130 MMTs. Confirmation of trend yields in the Northern Hemisphere are required to pull spot futures below $4.20 for any length of time. But adverse Black Sea weather is needed for a sustained recovery.

Chinese Soybean Imports In November

Dec 8, 2:53 pm | Soybeans, China

4The 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.

5And 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.

6The 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.


Chinese Soybean Imports In October

Nov 8, 4:35 pm | Soybeans, China

4The preliminary trade data from China that was released on Wednesday showed October soybean imports were up slightly from a year ago, and the largest import figure for the month, at 5.86 MMTs. The complete trade data will be released later in the month, but the US and Brazil are each known to have exported over 2 MMTs in the month of September. US exports jumped sharply through October, while the Brazilian export pace slowed. However, the Brazilian export pace has held above last year, which has limited the potential for early season US export totals. The October WASDE was about 1 MMTs too low on old crop Chinese soybean imports, and could reasonably raise the forecast for new crop imports by 1-2 MMTs, based on the October import and early season crush totals.

56 weeks into the 2017/18 crop marketing year, the Chinese crushing industry has not offered any indication that it is slowing down. Last week’s crush rate was estimated at just over 1.8 MMTs, slightly better than a year ago and the cumulative crush total to date is estimated at 10.3 MMTs versus 9.6 MMTs a year ago. Estimated Chinese hog producer margins are below a year ago, and down from the early year highs as market hog prices have declined. However, estimated margins are still very profitable. While Chinese hog inventory data has proven to be very unreliable, record large soybean crush rate and decline in estimated soymeal stocks, looks to be reflecting very strong feed demand. The sharp drop in market hog prices in the last year also appears to be confirming improved hog numbers/pork production.


Chinese soymeal prices bottomed last May and then steadily traded higher thru the summer. Today, spot soymeal prices are nearly 8% over the spring low.

  However, both soymeal and soyoil values are trading well under a year ago, while US soybean prices are nearly unchanged! This is concerning.

 The chart shows the CME soybean/DCE soy product crush spread, or an estimate for profitability of buying US soybeans today and selling soy products in China next month. Note that while the spot spread has started the year well under last year, it has not impacted either crush or import totals. Moreover, forward margins offered for the spring and summer months are giving Chinese soy crushers the opportunity to lock down paper profits that are near both last year and the 5 year average. This should keep China active in world soybean trade.