A sharp increase in April soybean imports into China appears to be due to seasonal stockpiling rather than any sort of stabilization in the ongoing African Swine Fever (ASF) epidemic. The month of April saw soybean arrivals accelerate to around 7.5 million tonnes, the largest monthly figure for 2019 and the largest since September 2018 when imports hit 8 million tonnes according to Chinese customs data.
April offtake was up 52 percent from March and up 9 percent from the same period last year. Brazil accounted for about 5.7 million tonnes and US loadings were 1.8 million tonnes. January through April offtake was still down 9 percent from last year.
The upswing in discharged volume comes as US and Chinese delegates continue to negotiate new trade parameters amidst a Chinese hog feeding industry disaster caused by the outbreak of ASF. The USDA Foreign Ag Services wrote last week, “In normal circumstances, swine industry restructuring and adoption of new genetics takes about 30 months. However, China’s ASF situation is unprecedented in complexity, scale and scope.”
The idea that the uptick in soybean arrivals in April is due to stabilization of ASF seems unlikely. The most likely reason why imports have increased is that coastal stocks of soybeans in China have been in a downtrend since January but have begun to stabilize in the 3.5 to 4.0 million tonne range according to Cofeed. Inventories are down about 7 percent from the same period last year.
We expect May 2019 deliveries to accelerate with the May to August period typically being the strongest seasonal period for deliveries into China. As of today, ClipperData shows 3.8 million tonnes en route to China, with most of this set to discharge in May. Brazil, the US and Argentina are the designated shippers.
The 2019 marketing year (October to September) offtake has totaled 42.3 million tonnes as of the end of April. May through September 2018 saw total offtake at 43.50 million tonnes. Assuming similar year-over-year volume to finish out the last five months of the 2019 marketing year, total offtake would be 85.83 million tonnes or 2.2 million tonnes below the current USDA forecast.
It will be important to watch offtake patterns going forward as any slowdown in monthly discharge volumes versus 2018 volumes leave substantial downside risk to current yearly import forecasts - at a time when global soybean inventories sit at record high levels.