SINGAPORE (Reuters) - Brazil is muscling in on the peak season for U.S. soybean sales to China, the world’s biggest buyer, as major producers vie to slim down bulging stockpiles after four years of record global output.
In deals signed last week, exporters from the Latin American country have sold four shipments to China for delivery in November and December and more are being negotiated, trading sources said, eating into U.S. market share with aggressive pricing.
The increased competition could renew pressure on benchmark U.S. soybean futures, and comes as U.S. growers are midway through harvesting a record crop.
“The U.S. really needs to have strong exports this year otherwise it will become the world’s storage house for beans,” said a Singapore-based trader with an international firm that has oilseed processing facilities in China.
Brazil and Agentina, the world’s biggest and third-biggest exporters, normally harvest over February-March and dominate global trading through to September. The United States, the second-largest exporter, harvests in August-October and sells about half of its annual exports of 50-52 million tonnes in the December quarter.
This year, however, Brazil and Argentina still have capacity to export an estimated 10-12 million tonnes of soybeans despite aggressively selling in the past months, traders said, reflecting growing output.
While the shipments sold so far represent only a fraction of the 7 million tonnes of soybeans China buys every month, both countries are likely to be active in the months ahead, the two traders said.
“They have sold four (cargoes) and there are 10 more cargoes being negotiated,” said a Europe-based trader at a Chinese firm who had direct knowledge of the deals.
“They are offering prices similar to the U.S., and Brazilian beans are generally of better quality,” he added.
Brazil has been offering soybeans at a premium of $1.60 to $1.70 over the Chicago Board of Trade November contract, almost at par with U.S. prices.
Soybeans are crushed to make soyoil, used mainly as a cooking oil, and soymeal, a protein-rich ingredient used to fatten animals. Brazilian beans are generally considered to have higher oil and protein content.
China buys about 60 percent of soybeans traded globally, making it a key market for growers, particularly as imports in Europe, a major U.S. buyer, are expected to tail off in 2016/17.
China is expected to import 86 million tonnes of soybeans in 2016/17, up around 4 percent on a year earlier, on strong demand for soybean meal to feed its growing national pig herd.
Global soybean inventories could also come under further pressure next year, with farmers in both Brazil and Argentina currently planting beans in near-perfect weather which could bring forward the harvest. Brazil’s area under harvest is also set to rise slightly.
“If Brazilian (new-crop) soybeans enter the market next February, it can impact U.S. exports,” said an analyst at official think-tank China National Grain & Oils Information Center in Beijing.
Reporting by Naveen Thukral; Additional reporting by Hallie Gu in BEIJING; Editing by Richard Pullin