The country’s annual feed demand may eventually rise by 30 million tonnes, and soybeans would be the main beneficiary
China will be a much larger buyer of soybeans this year than the market is anticipating, says an analyst.
“My sense is that all the current estimates of Chinese imports for 2021-22 are understating the figures,” Dorab Mistry, director of Godrej International, told delegates attending a conference organized by the U.S. Soybean Export Council.
“In reality China and China-based players are going to buy a lot more than what they are talking about today.”
He said the Chinese government is making a “Herculean effort” to drive down prices of the commodity by releasing stocks and forcing speculators to liquidate their positions.
“This cannot last,” said Mistry.
“Eventually they will have to replenish their stocks. They will have to boost their imports and at that stage, I tell you, crush margins will come back.”
Other panelists shared that bullish outlook for the commodity.
Gregg Doud, vice-president of Aimpoint Research and former chief agricultural negotiator of the Office of the United States Trade Representative, said China’s ban on feeding table scraps to hogs is a game changer.
“It may be one of the biggest changes in agricultural trade in my lifetime,” he said.
Half of the world’s hog population resides in China and half of those animals used to be fed swill or table scraps. But that is no longer allowed due to concerns surrounding African swine fever.
Doud said that will eventually result in an extra 30 million tonnes of annual feed demand and soybeans will be the main beneficiary of that increased demand.
Seth Meyer, chief economist of the U.S. Department of Agriculture, said U.S. crush margins are far above normal levels and that is increasing domestic demand for U.S. soybeans.
The reason margins are so strong is the overwhelming demand for soybean oil from the fledgling renewable diesel industry.
Soybean oil accounts for about 46 percent of the futures value of soybeans, up from 33 percent last October, and it is forecast to remain at that elevated level for the foreseeable future.
Soybean oil demand from the renewable diesel sector is forecast to climb to 19 billion litres per year by 2024, up from about four billion litres in 2021.
“I’ll tell you, these are big plants,” said Meyer.
U.S. soybean oil is selling for a US$250 per tonne premium over Argentine soybean oil, more than double the usual spread.
Mistry is also bullish palm oil prices. Production in Indonesia and Malaysia has been seriously curtailed due to COVID-related labour shortages.
“Palm oil will remain bullish right up to the end of the year,” he said.
That will in turn support soybean and canola oil.
Abundant Black Sea sunflower production will fill some of the void created by the short palm oil crop.