Chinese Soybean Buying Turned Political and U.S. Exports Depend on It

Some 1.6 million tonnes of U.S. soybean were bought by China in a single week, and that one number changed the shape of the U.S. export book. Chinese soybean buying has pushed U.S. soybean export commitments 8% ahead of the pace required to reach the U.S. Department of Agriculture target, turning a market that had been drifting lower into one that found a bid. Market estimates place China at roughly the halfway mark of its 25 million tonne commitment, or about 12.5 million tonnes. What follows is no longer a question of demand arithmetic. The remaining tranches are governed by a state visit that may not take place.

 

Bertrand Oesterle is Vice President of Clearing and Execution Sales at StoneX Financial Ltd in London, where he works with institutional clients on futures clearing and execution across global derivatives and listed markets. His coverage runs across the commodity markets those clients trade, including grains and oilseeds, where export commitments, government reports and trade policy set the terms for how physical flows get priced and hedged.

 

Key Themes from the Discussion

• China bought some 1.6 million tonnes of U.S. soybean in a single week.
• Estimates put China near 12.5 million tonnes of its 25 million tonne commitment.
• U.S. soybean export commitments now run 8% ahead of the required pace.

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Chinese Purchases Move U.S. Soybean Exports Into Green Territory

Chinese soybean buying has lifted U.S. soybean export commitments 8% above the pace needed to reach the U.S. Department of Agriculture figure for the season. "China has bought some 1.6 million tonnes of U.S. soybean over the past week", Oesterle notes, with market estimates placing the country near the halfway point of a 25 million tonne commitment. Specifically, that puts the running total at roughly 12.5 million tonnes, which is what carries the export book from behind schedule into positive territory. For U.S. sellers, the immediate consequence is a supportive demand signal arriving at exactly the moment harvest supply begins to weigh on the market.

 

China's Soybean Commitment Now Turns on a Single State Visit

The remaining half of China's soybean commitment is tied to a diplomatic calendar rather than to a commercial one. A state visit to the United States is scheduled for the end of the month, and it functions as the gate through which the next tranche of Chinese soybean buying has to pass. According to Oesterle, there is "a big question mark about these state visits", which leaves the timing of further purchases unresolved even with commitments running ahead of pace.   

Taiwan Arms Sales Threaten the Next Tranche of Chinese Buying

"There's been some talk on some media that maybe that may get canceled because China is not happy about the U.S. providing armament to Taiwan". Oesterle frames the resulting exposure plainly, noting that a spat on that front could reduce the next tranche of Chinese buying of U.S. soybean for political reasons rather than commercial ones. That is a distinct category of risk for commercial participants, because it cannot be read off crush margins, freight rates or crop conditions. Whereas a demand slowdown shows up gradually in export sales data, a political interruption arrives as a step change. The practical implication is that U.S. soybean export commitments being 8% ahead of pace describes where the book stands, not where it is guaranteed to finish.

 

--- Written by Frédéric Guétin, StoneX Media Producer

--- Expert: Bertrand Oesterle, StoneX VP of Clearing & Execution Sales