CFR China soybean flat price in rally mode on active demand coverage

The first month CFR China soybean flat price gained 2.4% week on week and 11% month on month to $742.87/mt in the week to March 3, after crossing the $700/mt mark for the first time since 2018 late-February, fueled by active demand coverage by state-owned importers and lower availability of offers from Brazil.

As of the beginning of the week started Feb. 28, 44% and 24% of the open demand for the April and May shipments had been covered, according to sources. For October and November shipments, 17% and 34% of the open demand was covered.

There were fewer offers from Brazil in the week to March 3, due to its annual Carnival celebrations. Chinese state-owned importers have been actively covering demand for nearby and deferred months for US old and new crops. The importers have covered eight US Gulf cargoes of November and December shipments at 345-348 cents/bu over November (X) Chicago Board of Trade, basis CFR North China.

They also bought five-six US Pacific Northwest cargoes of March and April shipments at 310-320 cents/bu over May (K) CBOT, basis CFR North China, sources said. Several US Gulf cargoes were also traded for shipment from March to April, basis FOB US Gulf, as buyers wanted to take advantage of lower freight rates from the US Gulf to North China.

The equivalent traded prices basis CFR North China were around 315 cents/bu over May (K) CBOT for April shipment, about 10-15 cents lower than the offer price of Brazilian soybeans for April shipment, considering a normalized quality spread between the Brazilian and US Gulf soybeans and freight rates, said a Chinese trader.

“Due to then tension between Russia and Ukraine, the shipping logistics have been disrupted, resulting in a higher supply of vacant vessels in US Gulf, driving down the freight costs for the route from the US Gulf to North China,” a Chinese trader said.

Three cargoes from Uruguay for May shipment were heard traded at 128 cents/bu over July (N) CBOT, basis FOB Uruguay, March 1.

Sources said the competition from crushers in Brazil had intensified. “It was heard that Brazilian crushers are willing to pay more to buy soybeans from farmers due their positive crush margin,” a Chinese broker said.

“We may consider both US Gulf soybeans and Brazil soybeans now for our demands of April and May shipments, since there are fewer firm offers from Brazil,” a Chinese crusher said.

According to industry sources, China will likely release 700,000 mt soybeans every week for two months. About 5.5 million-6 million mt of soybeans was expected to be released, higher than the prior expectation of about 4 million mt. China has not provided details about the volume and timing of releasing state reserves.

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Tags: China, price, Brazil, soybean, US, shipment