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August 21, 2019

China Continues Aggressive Purchases of Brazilian Soybeans

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The recent surge of Chinese purchases of Brazilian soybeans could leave Brazil with very tight supplies of carryover soybeans. In June, the Brazilian Association of Vegetable Oil Industries (Abiove) estimated that Brazil would end the year with a carryover of 5.6 million tons of soybeans. They have since revised down their estimate to 2.6 million tons and it may go even lower.

The reason for the declining stocks is China's aggressive purchase of Brazilian soybeans. Brazil has already exported more than 57.7 million tons of soybeans this year according to the Export Secretary (Secex) and recent purchases by China is destined to push the volume even higher.

During the first 15 days of August, China has purchased 3 million tons of soybeans with 20 vessels purchased just last week. The soybean export volume is less than in 2018 at the same time only because the 2018/19 Brazilian soybean crop is smaller than last year.

Thus far in 2019, Brazil has exported 57.7 million tons of soybeans, 10 million tons of soybean meal, and 814,000 tons of soybean oil.

It was originally estimated that Brazil would export 68 million tons of soybeans in 2019, but some analysts think it might reach 75 million. Part of the uncertainty is due to Conab's announcement that they are going to reevaluate their Brazilian soybean production data for the last two years. Many private analysts feel Brazil may have produced as much as 6 million tons more soybeans during the last two years than what Conab reported.

China's aggressive purchases of Brazilian soybeans have pushed up soybean prices at the Port of Paranagua 16% since May. Premiums have also increased to as much as $1.50 over the Chicago Board of Trade. China will still need to purchase more Brazilian soybeans in order to meet their needs if they follow through on their stated intension to not purchase any more agricultural products from the United States.