About 10 soybean cargoes from Brazil bound for processors in China have been canceled since last week, after Chinese soybean crushing margins turned negative and export premiums spiked in Brazil.
The spike is due to a drought that slashed the harvest in the world’s biggest grower, according to market sources quoted by Bloomberg.
Prospects for Brazil’s crop have deteriorated after weeks of dry weather, with analysts repeatedly cutting estimates for a harvest that was initially expected to be a record. Importers have been turning to American soybeans, with the pace of U.S. exports rising at a time of year when Brazilian cargoes normally dominate.
Chinese processors are running losses of about USD 20 a ton on imported soybeans at the moment and buyers are likely to put purchasing plans on hold for all overseas supplies, the same sources added.
China, the world’s biggest importer of soybeans, depends heavily on foreign supplies of soybeans for its processing industry, which produces meal for hog feed and cooking oil.
“Margins are bad, hog prices are awful and people don’t want to long a bunch of meal,” said Darin Friedrichs, co-founder and market research director of Sitonia Consulting, a China-based agricultural information service provider.
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