CFR China soybean basis dropped by 50 cents in a week

China demands remain weak

Soybean prices for July shipment to China fell 4.7% in the past week, tracking Chicago Board of Trade futures lower amid faster soybean planting in US and declining FOB Santos prices led by active farmer selling in Brazil.

The market was assessed by Platts at $728.63/mt on June 15, according to S&P Global Commodity Insights data.

The July CBOT soybean contract reached its highest, at $17.84/bushel, on June 10 after the WASDE report released by USDA. A higher than expected export volume of soybeans in US for marketing year 2021/22 supported market talk of tighter supply.

However, the futures lost the support in the past few sessions on news US soybean planting managed to speed up, market sources said.

The US Department of Agriculture said June 13 that 88% of the expected soybeans area was already seeded by June 12, compared to the market expectation of 90% and 93% in the same period in 2021.

According to the USDA, 70% of fields were in good or excellent condition. Meanwhile, the soybean prices on CBOT were also hit by potential US interest rate rises to tame inflation.

FOB Santos soybean basis was on decline as a stronger dollar against the Brazilian Real attracted higher selling volume from Brazilian farmers. FOB Santos soybean basis fell 48 cents/bushel week on week.

Meanwhile, the China gross crush margin remained negative, assessed at minus $21.69/mt by Platts June 15.

The gross replacement margin in China remained positive at 21 yuan/mt (3 cents/mt). Taking into account variable costs, the net replacement margin for spot trading would still be negative.

"Persistent negative margins would continue to keep demand coverage in China slow," a Chinese broker said.

According to market sources, the demand coverage was at 77% for July shipment, with open demand at 7 million mt. For August shipment, the demand coverage was at 55% with open demand at 6.5 million mt.