AN unexpected drop in short-term Chinese purchases of Brazilian soybeans is denting exports of the oilseed from the South American nation, which just a few weeks ago looked poised to benefit from the Sino-U.S. trade spat.

Chinese importers rushed to buy Brazilian beans after the government proposed a 25-percent tariff on U.S. cargoes April 4, but short-term purchases have dried up since last week as the world’s top importer grapples with weak demand at a time of abundant local supply, trade sources said.

“All the panic buying that we saw earlier in April has died down,” said a trader at an international trading firm that runs oilseed processing facilities in China.

“Demand for soymeal is very slow as pig farmers are making losses. Very few deals have been signed since last week for Brazilian soybeans for nearby shipment,” he added.

China imports more than 60 percent of soybeans traded worldwide, crushing them to make cooking oil and protein-rich animal feed ingredient soymeal.

The premium for Brazilian soybeans, including freight, quoted in China has dropped to US$94 a ton over July Chicago futures compared to a high of US$160 touched in April. The premium is typically US$50-60 a ton at this time of year.

Brazilian exports have also been hit as European and other Asian buyers have turned to cheaper U.S. supplies.

However, the fall in Chinese near-term demand for Brazilian beans is only seen as temporary as prices for cargoes from the South American country are expected to drop as it gathers a record harvest.

The nation is harvesting an all-time high crop of more than 119 million tons, boosting expectations of stronger exports, with consultancy Céleres estimating overseas sales will rise by 2 million tons in 2018 to 72 million tons.

China will cut its soybean imports for the first time in 15 years in 2018/19, the Agriculture Ministry forecast Thursday, with demand for animal feed faltering.

Hog prices in China registered one of the sharpest ever declines in the first quarter of the year and are below average production cost.

“Most soybean plants in China are now overstocked with meal and oil,” said a trader in Beijing.

“The main reason is demand-side. The hog price is not good so feed millers like to pick up cheap stuff.”

China’s April soybean imports fell to 6.9 million tons, a decline of 13.7 percent from a year ago.

(SD-Agencies)