By China’s soybean crushing margins, which measure profitability for processing soybeans into meal and oil, have improved significantly after being in negative territory since June 2024.
According to Shanghai JC Intelligence Co. Ltd., margins are now at their highest level in over two months.
This recovery comes at a time when the United States is preparing to harvest a record crop, presenting an opportunity for increased Chinese imports.
US soybean exports to China fall
Despite the improved margins, Chinese import demand from the United States has been relatively weak.
In the 2024-25 season, the US sold only 2.89 million metric tons of soybeans to China, marking the lowest level in 18 years outside the period affected by the 2018-2019 trade war.
This figure represents a 47% decline from the previous year. Much of China’s soybean needs have been met by Brazil, which has become a key supplier due to more competitive pricing.
Soy futures drop to 4-year low
A recent decline in soy futures — reaching a four-year low in August 2024 due to an anticipated record harvest in the US — has aided in improving margins for Chinese crushers.
With the US poised for its largest soybean harvest ever, this dip in prices could make American soybeans more attractive to Chinese buyers, especially as they look to diversify their sources following a reduction in Brazilian soy production.
The improved crush margins coincide with signs that China’s hog herd is expanding, which could lead to increased demand for soymeal — a key ingredient in animal feed.
This expansion is critical as the nation seeks to rebuild its pork supply following the devastating African swine fever outbreaks in recent years. Given the rising demand for soymeal, industry analysts suggest that China could secure an additional 675 million or more bushels of US soybeans by the end of the year.
US soybean crop conditions decline
Soy futures remained steady on Wednesday on the Chicago Board of Trade after the US Department of Agriculture (USDA) reported a decline in crop conditions.
The report indicated that crop conditions were below the average estimate of analysts surveyed by Bloomberg, largely due to a heat wave expected to hit the western grain belt over the next two weeks.
This could impact the yield potential of the record crop, adding further uncertainty to global soy markets.
The recovery in Chinese soybean crush margins could be a turning point for US exports. However, much will depend on the trajectory of US soybean prices and the ability of Chinese crushers to capitalize on the improved profitability.
The expected expansion of China’s hog herd and reduced Brazilian soy output could provide additional tailwinds for US exporters. Market participants will be closely watching upcoming USDA reports and Chinese purchasing patterns for further cues.
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