Canola growers shouldn’t put too much faith in reports that China will import far fewer soybeans than the U.S. Department of Agriculture is forecasting, says a grain industry analyst.
A Bloomberg News poll of researchers and grain traders has concluded China will import 59 million tonnes of the oilseed in 2012-13, well below the USDA’s estimate of 63 million tonnes.
The story says imports are slowing due to logistical problems getting the crop out of Brazil and faltering Chinese crusher demand due to declining vegetable oil prices and lower profits in the hog industry.
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The Bloomberg findings are backed up by a report issued by China’s state-owned researcher, Grain.gov.cn, which is forecasting 58 million tonnes of imports.
The agency says wavering Chinese demand will put downward pressure on global soybean prices. That could in turn cause a softening in canola values because the two oilseed crops are closely related.
Arlan Suderman, senior market analyst with Water Street Advisory in Wichita, Kansas, isn’t buying the reports of waning Chinese soybean demand.
“When it comes to China, one has to look at what they do rather than what they say,” he said.
What he sees is a country that is still aggressively sourcing soybeans from South America and the United States and releasing state reserves until South America can sort out its logistical problems.
Suderman said he has heard anecdotal stories that China’s soybean supplies are tighter than they’ve been in a long time and have been trending tighter over the last three to five months.
That doesn’t sound to him like a market experiencing slumping demand for the product. China has increased its soybean imports every year since 2004-05, and he doesn’t expect that trend to come to a halt this year.
Suderman said Brazil is finally starting to sort out shipment delays. He anticipates that the big Brazilian crop will soon hit the market with full force.
He expects China to be an active buyer of Brazilian soybeans because they will be far cheaper than China’s support price, which is more than $20 per bushel.
U.S. soybean export sales are on pace to hit the USDA’s target by mid-April for the marketing year that ends Aug. 31, another sign of strong Chinese demand.
Suderman puts more faith in the USDA numbers than what traders or other government agencies believe. The USDA tends to be on the conservative side with its estimates.
“I’m still sticking with USDA numbers at this point,” he said.
The one wrinkle is the news of another outbreak of bird flu in China. If it became as serious as the 2003 SARS epidemic, it could result in a slowdown of the Chinese economy, fewer people eating pork and fewer pigs eating soybeans.
Growth in Chinese gross domestic product fell by two percentage points in the second quarter of 2003 due to the SARS outbreak, according to a Business Insider report.
“There was so much fear, they just told everyone to stay home. The economy came to a standstill for a period of time,” said Suderman.
