Crushers in China to shut as supply shortage looms large

Soybean crushers in parts of northern and eastern China are preparing for one-month long suspension of crushing activities as the industry grapples with supply shortage amid poor crush margins.

Several crushing facilities in Shandong province and Tianjin city in northern China are due to shut their operations for one month between mid-February and late March this year, according to four market sources.

These crushing sites are owned by both international and domestic companies including Bunge, Louis Dreyfus, Cofco and Jiusan.

International agribusiness giant Bunge’s crushing facility in Nanjing in eastern China is also said to shut between late February and late March this year.

Southern China especially faces an imminent shortage of soybeans with domestic basis shooting to 680-750 yuan/ton, up from 400-500 yuan/ton at the beginning of this year.

This comes at a time when Chinese crushers are reluctant to buy soybean cargoes from Brazil and the US as margins have been negative.

Soybean cargo purchases this week have been nearly absent while some crushers even started reselling their contracted cargoes two weeks ago to avoid potential losses if those beans are crushed in China.

The main reasons behind China’s stagnant cargo buying pace are high global soybean price and weak domestic pork price.

Both CBOT soybean futures and cash prices in Brazil have spiked since the start of 2022 due to fears Brazilian crop loss.

But in China, demand for soymeal has been dampened by poor margins in the hog sector that is seeking to cut its soymeal usage to trim costs.

As Chinese crushers burden pressure from both sides, they are stranded to book cargoes for March and April shipments this year.