China rumors to wash out US soybean cargoes as premiums fall

Chinese soybean buyers are rumored to have started dumping previously contracted US cargoes as cash premiums slumped in June amid mounting bearish macro pressure that weakened crush margins.

Trading houses and crushers in China sold, also known as wash-out in the industry, 7-8 cargoes of US soybeans last week in an attempt to limit losses as cash premiums fell sharply in recent weeks.

The cargoes rumored to have been cancelled or resold to other market participants were shipments from the Gulf in August and September this year, according to three market contacts.

“It is uncertain. But there was a wave of [crushers] selling Brazil and buying US earlier in June when Brazilian [soybean] prices tanked,” according to one China-based soybean trader at a major international crusher.

The rumor came against the backdrop of weaker crush margins triggered by a selloff of soymeal and soyoil futures in China amid rising macro pressure. Crush margins slumped $20-30/ton in the past week.

Soymeal and soyoil futures on China’s Dalian Commodity Exchange, where crushers hedge the vast majority of their positions, slumped in the past two weeks due to fears of a global recession and weaker feed demand in China. The most liquid contracts for both products fell to the lowest point in 5-6 months.

On top of the selling pressure from weaker margins, lower premiums for Brazilian soybeans also created strong incentives for crushers to opt for the cheaper alternative.

CFR China premiums for July 2022 to March 2023 shipments of Brazilian soybeans dropped 80-90 c/bu across the curve in the past month, and those for US soybeans from the Gulf slipped 40-50 c/bu.