By Chinese soybean processors are shifting their sourcing strategies away from US oilseeds and towards Brazilian cargoes due to price competitiveness and concerns over potential import tariffs, Reuters reported on Friday.
These concerns stem from the upcoming inauguration of President-elect Donald Trump and the possibility of his administration imposing trade restrictions on Chinese imports.
The uncertainty surrounding future US-China trade relations has already caused disruptions in agricultural trade flows to China.
As the world’s largest importer of agricultural goods, China plays a crucial role in global commodity markets.
China’s procurement strategies
The anticipation of renewed trade tensions under the Trump administration has led Chinese buyers to proactively adjust their procurement strategies.
This includes stockpiling inventories to mitigate potential supply disruptions and actively seeking alternative suppliers to reduce dependence on US oilseeds.
The shift towards Brazilian soybean cargoes highlights the vulnerability of US agricultural exports to geopolitical risks and trade policy uncertainties.
It also underscores the importance of maintaining competitive pricing and stable trade relations for US producers to retain their market share in key export markets like China.
Chinese processors have secured almost all of their soybean cargoes from Brazil for first quarter shipment, according to three trade sources quoted by Reuters.
This move signifies a potential shift in the global soybean trade, as China, the world’s largest soybean importer, typically sources its supply from both Brazil and the US.
China looking past the US
Last year, Brazil supplied 54% of China’s first quarter soybean imports, while the US accounted for 38%, according to the report.
This year, the early procurement from Brazil suggests a potential increase in Brazil’s share of the Chinese market.
China’s dominance in the soybean market is undeniable, as it imports more than 60% of the soybeans shipped worldwide. Any shifts in its sourcing strategy can have significant implications for global soybean prices and trade flows.
“Chinese crushers are now booking Brazilian cargoes for February and March shipment,” a trader in Singapore told Reuters.
Both state-owned and private crushers, all of them are taking Brazilian beans. It is a 100% shift to Brazil.
The US and China previously engaged in tit-for-tat tariffs during Trump’s first term in 2018.
As a result, Beijing took permanent measures to decrease its dependence on American farm goods.
Trump has again threatened tariffs between 10% and 60% on Chinese goods, which would likely result in retaliatory Chinese duties on US farm products.
Chinese customs data indicates that the share of China’s soybean imports from the US fell to 18% in the first 11 months of 2024, compared to 40% in 2016.
Meanwhile, Brazil’s share rose to 74% from 46%. South American soybeans, harvested early in the year, dominate global trade until US supplies become available in August.
This year, Chinese oilseed importers have shifted their purchasing to Brazilian beans earlier and in larger quantities this year, impacting US suppliers towards the end of their peak marketing season in January.
As a result, the US, the second-largest soybean exporter after Brazil, is expected to have 10.34 million tons of beans remaining by the end of the 2024-25 marketing year in August, the highest in five years, according to the US Department of Agriculture estimates.
Cheaper soybeans
The competitive pricing of soybeans in Brazil has a significant appeal compared with the US beans, traders told Reuters.
Lin Guofa, a senior analyst at Bric Agriculture Group, a consultancy, told Reuters:
Concerns over potential trade tensions, especially after Trump’s re-election, led to increased soybean purchases in Q4 2024, with shipments arriving in late 2024 and Q1 2025.
“Favourable weather in Brazil and the depreciation of the real have lowered production costs, encouraging further soybean imports,” Lin added.
Soybeans from Brazil to China, including freight and other costs are priced at $420 per ton, while those from the US Pacific Northwest cargoes were at $451 a ton, according to the report.
However, ample domestic supply of soybeans in China is likely to curb demand, Reuters said.
China had imported 105.03 million tons of soybeans in 2024, which is a record, according to the report.
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