China’s preliminary trade data for the month of June was released on Thursday, showing all origin soybean imports totaling 7.69 MMTs. The June figure was inline with expectations and just above last year, but a 20% decline from the May import total. Exports from Brazil and US during the month of June indicate that the July import rate could slip below last year, and be closer to 7.5 MMTs, which if realized would put Oct-Jul import total just over 74 MMTs. In the July WASDE report the USDA increased their estimate for 2016/17 Chinese soybean imports to 91 MMTs. If our estimate for July imports is correct, August and September imports would need to average just over 8 MMTs to reach the USDA’s target. The problem is that Brazilian export shipments to China peaked back in April and have been trending lower ever since, while the US export pace is bouncing along at seasonal lows.
The Brazilian vessel lineup continues to add boats, with just over 6 MMTs of soybeans expected to sail during the month of July. If realized, this would be a the largest July export total on record. However, roughly 75% or 4.5 MMTs of the that export total will be headed to China, which means that US shipments would have to accelerate in the coming weeks to make up the Brazilian short fall to reach 8 MMTs in August. US outstanding export sales are just below last year at 6.7 MMTs, but just 1.7 MMTs of that total is to China. China is on pace for record imports this, year but we think that the USDA may have been preemptive in raising their annual import forecast on Wednesday. Brazilian/US shipments to China need to pick up through the last half of July and into August for the USDA’s forecast to be realized.
Estimated Chinese crush margins turned negative in late February as building domestic soymeal stocks and a record large crush pace pressured soy product prices lower. However, estimates on weekly crushing rates have generally matched or exceeded a year ago since March. Last week’s crush was estimated at 1.7 MMTs, while the cumulative crush total of 68 MMTs is at 107% of a year ago. While the USDA increased their estimate of old crop Chinese soybean imports, they maintained the old crop crush estimate at 86.5 MMTs or 106% of last year. Estimates for Chinese soymeal stocks have backed off the June highs, but are still historically large and in excess of 1 MMTs. However, soy product prices have followed the US markets higher and margins are now thought to be at or above break even levels. Note that the seasonal trend for crush rates through the end of the year is flat, and we agree with the USDA’s 86.5 MMT soybean crush forecast.