China's Soybean Crushers Face Margin Squeeze Amid Tight Supply, US Tariffs

China’s private soybean processors are grappling with a costly fourth-quarter supply shortage and deteriorating profit margins, caught between tightening inventories in top exporter Brazil and a 10% tariff that keeps U.S. cargoes largely inaccessible. The industry is now pinning its hopes on President Xi Jinping’s upcoming visit to Washington to deliver a potential reduction in agricultural trade barriers.

Supply Squeeze and Tariff Pressures

The world's largest oilseed processing industry is facing a challenging environment as it heads into the final quarter. Weakening domestic demand for animal feed, driven by a shrinking pig herd, has already compressed profits. Now, a supply crunch from South America is forcing processors to look for alternatives.

However, a 10% import tariff on U.S. agricultural goods has effectively locked private crushers out of the North American market. While state-owned traders have previously purchased U.S. soybeans, private firms find the tariff-laden cargoes unprofitable. "We are not considering U.S. soybeans because of the tariffs," a China-based crusher told Reuters. Any potential shift would depend on a policy change.

"As South America nears the end of its marketing season, private crushers will need access to U.S. soybeans," said Johnny Xiang, founder of Beijing-based AgRadar Consulting. He noted that access would depend on "tariff reductions or, failing that, on Sinograin reserve auctions to keep their plants operating."

Negative Crush Margins

The financial strain on processors is severe, with crush margins deep in negative territory. According to Rosa Wang, an analyst at Shanghai JC Intelligence Co., theoretical crush margins for both Brazilian and U.S. soybeans were 150 to 230 yuan ($22.35 to $34.27) per ton in the red for October-December shipments, even before accounting for the U.S. tariff.

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Compounding the issue, benchmark U.S. soybean futures have risen nearly 12% from their June lows, driven by adverse weather and buying from Chinese state firms. As of early September, key prices included:

• Brazilian soybeans: Offered at a premium of $3.15 to $3.20 per bushel over the CBOT November contract for November shipment to China.
• U.S. Gulf cargoes: Offered at a slightly higher $3.20 to $3.25 per bushel, a price that excludes the 10% tariff.

Dwindling Global Stockpiles

Brazil has limited capacity to increase its fourth-quarter exports to China due to strong domestic crushing activity and robust sales to other international buyers. According to Safras & Mercado, Brazilian farmers had already sold an estimated 85% of the 2025/26 crop by early September. Data cited by Marex strategist Eduardo Vanin showed Brazil's soybean shipments to China through late August were down 2.6 million tons from a year earlier, while its shipments to other destinations rose by 6 million tons.

While Argentina supplied an additional 7.9 million tons to China in 2025, analysts expect this buffer to shrink in 2026. With the U.S. harvest approaching, the market is watching for any signs of a diplomatic breakthrough that could ease the supply and cost pressures on China's beleaguered soybean crushing industry.