Increased Brazilian Supply Set to Elevate China's Soybean Imports

Brazil's soybean production is set to rise to historic levels, surging by 15 million metric tons (mmt) to a new record of 169 mmt, according to World Agricultural Supply and Demand Estimates (WASDE) May-24 report.. This significant increase in production is anticipated to boost exports and potentially place downward pressure on prices in 2024. In the upcoming 2024/25 season, China's soybean imports are projected at 109 mmt, driven by solid demand for animal feed from the poultry sector and increased vegetable oil consumption. Soybean stocks are also projected to reach a new record of 39 mmt.

Figure 1: China’s Soybean Import Volume 2019-2023

Source: Tridge

Soy exports from Brazil to China experienced a significant 72% year-on-year (YoY) increase in Jan-24 to-Apr-24, highlighting Brazil's growing role in meeting China's soy demand. Brazil continues to hold its position as China's number one supplier of soybeans, with 69.95 mmt delivered in 2023, a 28.60% YoY increase. On the other end, soybean exports from the United States (US) to China have dropped significantly in recent years. In 2023, China imported 25.18 mmt from the US, a 14.73% YoY drop and a 22.01% decline from a record 32.29 mmt in 2021. Several factors contributed to this decline in exports, such as political tensions between the two countries. Still, Brazil's competitive soybean pricing was the most decisive factor in the trilateral trade situation.

Brazilian and China Soybean Production Trends

Despite the increased soybean production mentioned above, soybean meal exports are projected to contract following decreased domestic demand. Similarly, soybean oil exports are expected to decline due to rising domestic consumption and strong domestic demand for biodiesel. The soybean acreage is anticipated to increase by 2.5% YoY to 112 million acres.

Conversely, according to the China: Oilseeds and Products Annual report of the United States Department of Agriculture (USDA), China's soybean production in the 2024/25 season is expected to drop to 19.6 mmt, from a record high of 20.84 mmt in 2023/24, due to a decrease in the planted area to 9.95 million hectares (ha). China's farmers still prefer other crops like maize, wheat, and rice, despite the government's measures to boost soybean production. Additionally, farmers are discouraged from price drops in the 2023/24 season due to an oversupply, reflected in acreage, which dropped by 4.96% YoY from 10.47 million ha.

Figure 2: Tridge Price Indices and Forecasts for Soybean in China

Source: Tridge.

Impact on Soybean Prices

Global soybean prices are expected to soften in 2024/25 due to rising global stocks, with Brazil, the US, and Argentina contributing to most of this growth. China is also projected to build stocks to 39 mmt, accounting for nearly 31% of global soybean stocks at the end of 2024. According to Tridge, despite a rise in May-24, further declines in soybean prices are expected due to increased supply.

Overall, Tridge anticipates that demand for soybeans in China will continue to grow, driven by increased soybean meal (SBM) inclusion rates due to competitive prices, a stable poultry sector market, and expanding aquaculture demand.