President Joe Biden and Chinese leader Xi Jinping plan to meet Wednesday during the Asia-Pacific Economic Cooperation summit in San Francisco. That meeting is helping spur purchases of U.S. soybeans.
China bought around 3 MMT of soybeans or 110 million bushels from the U.S. last week, a volume that reportedly surprised the market. They added another 7.5 million bushels on Monday.
That’s even though they are more expensive than Brazilian supplies and processing margins are weak in China. The purchases are seen as a goodwill gesture ahead of Xi’s meeting with Biden.
Mike Zuzulo, Global Commodity Analytics, says, “My mindset is their pork industry is in tough enough shape. Their deflation is bad enough their consumer is stalled out since the zero COVID policy that they really don’t need to buy extra. What they’re probably looking and fishing for is some cash injection, some foreign direct investment, because that has been pulled out dramatically from the Chinese economy, and it’s really hurting them, and I think President Xi knows that.”
The meeting is also hoped to be the start of better trading relations between the U.S. and China. However, Zuzulo is concerned China is washing out of soybeans in Brazil and only coming to the United States because of weather concerns in South America.
He says, “My issue would be they will find another buyer if they can find it. It is very fortunate for the US soybean grower that we have this weather issue as we go to this meeting, because if we hadn’t had the weather in South America, I think we would not be able to be this kind of strength in soybeans.”
Meanwhile, the head of world trading at Cargill, the world’s largest agricultural commodities trader, indicates China is purchasing more than it needs for domestic use, signaling it’s seeking to build stockpiles. Other sources indicate that Sinograin has a dual role of crushing beans and managing reserve stocks for the government and Xi’s visit is the only logical reason Sinograin would pay a big premium over Brazil beans because crushers don’t pay above-market prices.
