China to cut back on soybean reserve destocking amid record cargo buying

The state grain stockpiler in China is said to have changed their original plan of destocking national soybean reserves and cut back on the previously intended volume, several China-based sources informed Sitonia Consulting.

China’s stockpiler Sinograin announced a destocking campaign last month through which they will sell 4-5 million tons of national reserves to private companies between March and May this year to ease rising prices for grains and oilseeds.

Despite that China’s National Food and Strategic Reserves Administration never confirmed the exact figure, market analysts and traders expected a range of 400,000-700,000 tons per week throughout the two-month period.

However, a source close to the company said that the total destocking volume will be lower than the original figure as state companies ramped up soybean cargo buying last week.

The new figure is still unknown to the market.

Sinograin have begun to auction soybean reserves since last week. It hosted an auction of nearly 27,000 tons of 2018 domestic harvest last Friday, and have announced to auction more than 58,000 tons of 2018 and 2019 harvests this week so far.

The domestic market has been anticipating Sinograin to auction soybean reserves since the beginning of this year, as both futures and cash prices for soymeal and soybean jumped to a record high amid negative crush margins, slow cargo buying and stagnant Brazilian crop harvest.

Therefore, the main Dalian soymeal futures (May 2022 delivery) has spiked more than 30% since the start of 2022 to a contract-high of 4,266 yuan/ton (675 USD/ton) on Wednesday, and cash soymeal price is also trading near its record of 4,565 yuan/ton (722 USD/ton).

The No.2 Dalian soybean futures for imported GMO soybeans are also hovering near their historical high with the main contract quoted above 5,500 yuan/ton (870 USD/ton).

Talks of Sinograin trimming its destocking volume sparked after Chinese crushers booked nearly 60 cargoes of both 2022/23 new crop and 2021/22 old crop soybeans from the US and Brazil last week.

This is one of the highest single-week cargo buying volume from China since the US-China trade war in 2018, in spite of poor crush margins.

More than half of the cargo purchases last week were done by Cofco and Sinograin for April and May 2022 shipments from Brazil as well as November and December shipments from the US.