Thanks, great overview. China for sure uses ag commodities as a geopolitical tool since its adversaries are mostly ag exporters. How durable is the Brazil-China symbiosis that facilitates this? China's protein supply seems to be OK in the short term judging from low prices for soybean meal and rapeseed meal prices not spiking. Reuters reported Chinese purchases of Brazilian soybeans have been booked into October. November, when Brazilian soybeans run out, happens to be the 90-day deadline for a U.S.-China deal.
On Brazil–China, by all available accounts (both public and from conversations I’ve had this year) Brasilia looks to be a particularly strong partner for Beijing, and I don’t see a time limit on that relationship.
I hadn’t made the connection between the 90-day deadline and the seasonal hand-off in November when Brazilian beans run out, it's an important one.
By then China will likely have taken ~65 Mt of Brazilian soybeans this year, but that still leaves a sizeable shortfall against normal demand. Even with Argentine volumes and the recent restock of state/commercial reserves, those buffers can only bridge a few weeks.
There seems to be an expectation that there’ll be some form of deal - MARA’s CASDE update last week noted U.S. growing conditions improving and expectations of a bumper harvest (美国大豆主产区作物生长态势良好，丰产预期持续升), which would perhaps point in that direction.
As things stand, I do wonder how far Beijing is willing to dip into the reserves before returning to U.S. purchases. But that timing looks increasingly hard to avoid, and it would not be the first time soybean buys have been used in a tit-for-tat context.
Thanks, great overview. China for sure uses ag commodities as a geopolitical tool since its adversaries are mostly ag exporters. How durable is the Brazil-China symbiosis that facilitates this? China's protein supply seems to be OK in the short term judging from low prices for soybean meal and rapeseed meal prices not spiking. Reuters reported Chinese purchases of Brazilian soybeans have been booked into October. November, when Brazilian soybeans run out, happens to be the 90-day deadline for a U.S.-China deal.
Thanks Fred, really appreciate your comment.
On Brazil–China, by all available accounts (both public and from conversations I’ve had this year) Brasilia looks to be a particularly strong partner for Beijing, and I don’t see a time limit on that relationship.
I hadn’t made the connection between the 90-day deadline and the seasonal hand-off in November when Brazilian beans run out, it's an important one.
By then China will likely have taken ~65 Mt of Brazilian soybeans this year, but that still leaves a sizeable shortfall against normal demand. Even with Argentine volumes and the recent restock of state/commercial reserves, those buffers can only bridge a few weeks.
There seems to be an expectation that there’ll be some form of deal - MARA’s CASDE update last week noted U.S. growing conditions improving and expectations of a bumper harvest (美国大豆主产区作物生长态势良好，丰产预期持续升), which would perhaps point in that direction.
As things stand, I do wonder how far Beijing is willing to dip into the reserves before returning to U.S. purchases. But that timing looks increasingly hard to avoid, and it would not be the first time soybean buys have been used in a tit-for-tat context.