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Chinese soybean crushers slow bean buying on poor margins

By Hallie Gu and Gavin Maguire

BEIJING/SINGAPORE, April 21 (Reuters) - Chinese soybean crushers have slowed bean purchases for deliveries through August as poor margins curbed appetite, traders and analysts said.

Reduced demand in the world's top soybean buyer could cut China's appetite for bean imports, already forecast to drop in 2021/22 by nearly 10% from a year ago due to poor livestock production margins and elevated bean prices.

"China's buying for shipments between June-August is very slow due to poor crush margins," said Zou Honglin, analyst with the agriculture section of Mysteel, a China-based commodity consultancy.

Unless crush margins improve, soybean purchases could fall further, Zou said.

China was expected to need 7-8 million tonnes of soybeans each month between June-August, but less than 20% of that demand has been covered so far, traders said.

Crush margins for Brazilian and U.S. soybeans for delivery in June and July are currently around -20 yuan ($3.11) to -5 yuan per tonne, while margins for August U.S. Gulf cargoes were slightly positive, traders said.

Meanwhile measures to contain the worst COVID-19 outbreaks in China since early 2020 have restricted transport of people and key agricultural products this month, further denting demand and disrupting trade.

The United States Department of Agriculture further lowered its estimate for China's 2021/22 soybean imports to 91 million tonnes in April, down 9% from a year earlier.

"Overall demand for soymeal has come down as the use of soymeal in both hog and poultry feed has fallen. Soymeal is expensive and the cost pressure is huge. Disruption on logistics also impacted demand," said a manager with a crusher in northern China.

"Crush margins were locked for over 80% of shipments in April and May, so arrivals would be fine for now, but not a lot in June and later," the manager said.


Pig farmers have turned to alternative feed ingredients to replace soymeal as they face losses this year due to low pork prices. Losses hit their worst levels in years in March before slightly improving. <JCI-HOGM-SICH><JCI-HOGM-HENAN>

Poultry producers, another major soymeal consumer, have also suffered.

"Profits are not good, and logistics are facing great challenges. Feed demand from poultry has dropped about 10% from a year earlier," said a manager with a major feed producer in China.

"Broiler chicken producers are also cutting soymeal rations in feed, though the fall should be smaller (compared with pig feed)," the manager said.

Profits from poultry farming were also hovering around break-even levels this year.

To cool high domestic soybean and soymeal prices, Beijing has been releasing soybeans from its reserves, putting on sale about 500,000 tonnes of imported beans each week.

Appetite for the auctioned beans has been flat so far, but traders said domestic crushers could step up reserve purchases to meet their demand needs for the June-July period. ($1 = 6.4394 Chinese yuan renminbi)

(Reporting by Hallie Gu in Beijing and Gavin Maguire in Singapore; Editing by Kenneth Maxwell)

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