A fall in soybean cargoes since July has forced Chinese crushers to reduce activity sharply, with imports in the third quarter down 9.1% year on year, reducing soybean meal production and driving up spot soybean meal prices since August.
The shortage has prompted Chinese authorities to consider allowing large-scale soybean meal imports — just one cargo was recorded in 2021-22 — with Brazil the most likely supplier, following China’s recent decision to open its markets to Brazilian corn imports.
According to S&P Global Platts, the documentation process for soybean meal imports is underway and could be finalized soon, prompting discussion in the market over what impact the option would have on China’s feed millers.
Chinese crushers said offers for Brazilian meal were already available for December shipments, which would likely arrive in China in February, after the Lunar New Year.
However, most market participants doubted China’s feed sector would import soybean meal from Brazil if the option became available, saying feed millers were inexperienced in importing, futures pricing and foreign exchange hedging, and accustomed to purchasing soybean meal from local crushers in yuan and paying transport fees only from the crusher.
If they were to import Brazilian soybean meal, they would have to pay for cargoes in US dollars and transport costs from ports, which may involve more capital risks and costs than feed millers were able to manage, market sources said.
The shelf life of soybean meal is also short and shipments from Brazil to China increase the risk of quality deterioration, a soybean meal trader said.
The soybean meal that feed millers collect from local crushers is typically crushed within 1-3 months and stored in warehouses with dry conditions, while maritime transport could result in high moisture content in storage conditions that lead to quality deterioration, he added.