China's Weak Demand and Tariff Snub Pressure US Soybean Exports

China's soybean buying is poised to slow in the coming months, pressured by weakening domestic animal feed demand and deeply negative processing margins. The outlook dims prospects for U.S. soybean cargoes, which were notably excluded from a list of agricultural products slated for tariff relief following recent trade talks, according to a Reuters report.

Domestic Headwinds Weaken China's Appetite

Chinese oilseed processors, or crushers, are facing significant financial headwinds. Crushing margins for soybeans scheduled for November shipment are firmly in the red, with losses ranging from 120 yuan to 200 yuan ($17.90 to $29.83) per ton for U.S. beans, according to Rosa Wang, an analyst at Shanghai JC Intelligence. Processors in the key hub of Rizhao were losing 33.54 yuan for every ton of soybeans processed on Tuesday, LSEG data showed.

This unprofitability is compounded by sluggish demand and bloated inventories. A government-led effort to curb overcapacity in the hog industry has shrunk sow herds, reducing the need for soymeal in animal feed. Meanwhile, soybean inventories at 111 Chinese crushing plants hit 7.96 million tons in late September, the highest level in at least 15 years, according to consultancy Mysteel. Underscoring the weak appetite, a recent state auction of imported soybeans saw only 37.3% of the 514,000 tons offered find buyers.

US Exports Sidelined by Tariffs

While China is set to lower tariffs on some U.S. farm goods, soybeans remain subject to an additional 10% import duty implemented during the trade war. This makes U.S. supplies uneconomical for commercial buyers, who have largely covered their needs through early February with shipments from Brazil and Argentina, traders told Reuters.

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Even without the tariff, U.S. soybeans face stiff competition. Brazilian soybeans were quoted this week at around $590 per ton, on par with U.S. cargoes before the tariff is applied. Traders noted that crushers often prefer Brazilian beans for their typically higher oil content. While Chinese state-run companies have purchased about 13.7 million metric tons of U.S. soybeans, private crushers have almost exclusively bought South American supply.

Market Impact and Outlook

The slowdown in Chinese buying is weighing on global prices. Benchmark Chicago soybean futures have fallen 1.5% so far this week, with analysts expecting further pressure as the U.S. harvest accelerates. Chinese buyers booked the fewest soybean cargoes for September in four years, according to Marex strategist Eduardo Vanin.

Looking ahead, the market sentiment remains bearish. "Unless margins recover, commercial buyers are unlikely to book more cargoes from overseas," said Johnny Xiang, founder of Beijing-based AgRadar Consulting. He added that if domestic supplies tighten, crushers are more likely to turn to state reserve auctions or idle their plants for maintenance rather than import more beans at a loss.