China imported 79.08 million tonnes of soybeans in the first ten months of 2021, down 5% from the previous year. Crushers in the country increased purchases earlier in 2021, anticipating high demand due to the recovering hog herd. However, demand dropped as pig supplies exceeded demand, causing prices to fall. This deflation resulted in severe revenue loss for pig farmers during the summer months.
Crushers purchase soybeans to crush into soybean meal to feed livestock and to produce soybean oil, at a ratio of about 80:20, respectively. Low crush margins in recent months have curbed soybean demand. Crushers increased purchases of soybeans at the beginning of the year, anticipating strong soybean meal demand from a fast recovering hog herd. However, shipments have slowed down in recent months, as falling pig prices suppressed soybean meal demand. In June, crush margins hit record low levels. China's hog margins have dropped since the beginning of the year and remained low on tumbling pork prices. Hog production margins collapsed due to the outbreak of African Swine Fever causing large volumes of pigs to be slaughtered, limiting demand for soybeans and soybean meal.
A slowdown in China’s economy is weakening the country’s soybean import demand. According to the International Grains Program at Kansas State University, increasing coal prices, due to a trade conflict between China and Australia, are impacting the industry, and reducing soybean crush rates. Due to power curbs caused by limited coal supplies, in many Chinese regions, crushers cut operations, which directly pushed up prices.
U.S. soybean exports of 2021/22 MY are steadily recovering from delays caused by damages to barges, elevators, ports, and infrastructure on the Mississippi River by Hurricane Ida more than a few months ago. Hurricane Ida hit the US Gulf Coast in early September, damaging at least three of the dozen export terminals situated along the Mississippi River. China is the US’ leading soybean market, and the damage caused by Hurricane Ida has impacted shipments to the Asian country. Although soybean shipments are recovering, with 1.7 million tons of soybean exported from the US during the first week of October, shipments are still below expected levels.