US Shipments to China, Pakistan’s Imports Send Soybean Futures Higher

Soybean futures are looking to initiate a rally this week after new government data found China is still importing US soybeans. The commodity also benefited on analysis that the world’s second-largest economy may still need to import US soybeans in the coming weeks because there is not enough supply.

November soybean futures rose $0.08, or 0.9%, to $9.015 per pound at 16:34 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean prices, which have surged nearly 4% over the last month, dipped below nine cents to kick off the trading week before paring those losses.

Year-to-date, soybean prices are down 7.6%, but they have experienced most of those losses since May.

For weeks, it had been anticipated that China would slash imports of US soybeans and import more from Brazil. While it is true that Brazil has increased production of soybeans, experts warn that the South American nation will be unable to keep up with the demand. The Chinese government has also launched a five-year plan to boost domestic output of soybeans by subsidizing farmers.

China has to resume purchases of U.S. soybeans. The South American supply shortage will make it necessary for China, in our opinion, to import 15 million tonnes of U.S. soybeans in October 2018/March 2019, even if the current trade war is not resolved.

There is a risk that China will have to cut back its livestock production, implying higher prices on the domestic market.

Higher imports are a reflection of a tariff structure that favors soybeans over soybean meal and growing demand from Pakistan’s feed sector.

The development and modernization of Pakistan’s poultry and dairy sectors is generating new demand for high-protein feed ingredients as inclusion of soybean meal in rations increase and overall demand rises.

In other agricultural commodities, December corn futures advanced $0.04, or 1.11%, to $3.65 per pound. September wheat futures tumbled $0.06, or 1.04%, to $5.685 a bushel. September orange juice futures plunged $0.021, or 1.26%, to $1.643 a pound.

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