WASHINGTON — There has been some concern in recent weeks that Chinese commodity buyers may begin playing cat and mouse with the United States soybean market in an attempt to lower the price of soybeans and get a better bargain. Those concerned were raised briefly last week when China did indeed cancel a purchase of soybeans from the U.S.
The cancellation might not have been the start of price lowering efforts made by the Chinese, but Mike Zuzolo with Global Commodity Analytics says that country may be changing the way they buy U.S. soybeans in the near future as prices begin to rise.
“I am worried about soybean prices going up high enough that the Chinese will begin buying soybeans on a hand to mouth basis,” Zuzolo said.
The main reason China is looking for cheaper soybean prices as they shop the globe is because their soybean crushing margins are deep in the red right now and their oversupply of hogs is hitting extreme levels.
“Hogs in China are currently bringing the lowest price at market since the first quarter of 2015,” Zuzolo said. “A lower number of backyard hog production and more commercial producers have caused this oversupply and that means they can’t afford to crush more expensive soybeans to feed to cheap hogs.”
Zuzolo says the Chinese only have two soybean suppliers, the U.S. and Argentina, to choose from for soybean imports. Depending on the actual size of the upcoming Argentine soybean crop, the United States may be in pole position when it comes to the Chinese market.
—Global Commodity Analytics