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Stronger China outlook buoys soybean import prospects

After weeks of stockmarket wobbles, China’s National Bureau of Statistics this week tipped the country to keep growing its economy at an annualised 7% in 2015, in line with its second quarter performance. Solid economic fundamentals will shore up expectations for strong second half soybean import demand, against a backdrop of faltering domestic oilseed production and livestock inventory rebuilding. Domestic oilseed output is expected to drop 6% in the new marketing year to 57mn t, according to USDA, with 2015/2016 Chinese soybean output forecasted at 11mn t. Chinese swine prices meanwhile have risen as second quarter inventories fell nearly 10% below year-ago levels, giving farmers a strong incentive to breed bigger litters. Chinese crush spreads are already at their highest levels since mid-2014. Combined with an upswing in imports a strong domestic crush could see soybean oil substituting palm oil demand as this week’s Indonesian export tax hikes corrode palm oil export economics from China’s largest palm oil supplier.

Brazilian soybean exporters will be hoping to remain beneficiaries of Chinese import demand after dominating first half shipments to China, according to Chinese customs authorities. Brazilian shippers have moved 11.24mn t of beans to China so far this year, putting them on track to smash the 12.5mn t they shipped to China in 2014/2015 compared to the 23.6mn t shipped from the US. US exporters typically only get into top gear in the second half as the new crop comes to market, with second half US exports to China last year surging to 17.4mn t from the 6.21mn t shipped in the first half. US exporters, in the new marketing year, will have to contend with a smaller crop YoY as well as likely strong domestic crush demand, while Brazilian exporters will be looking for extra sales outlets for the 12% YoY rise in Brazilian farmers’ soy output.

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