Beijing has long viewed its dependence on foreign soybeans, which are processed into animal feed and cooking oil, as a vulnerability in a world where geopolitics and viruses can quickly disrupt commodity flows. However, robust imports from South America are hitting a fairly tepid local economy, forcing Chinese soyoil processors to seek new markets.
Also Read: China fires deputy chief in Hong Kong, second official in six monthsIt’s another example of flagging consumption in China resulting in a surplus, with the excess flooding into global markets. In this case, it’s a development that’s welcome in India, the world’s biggest importer of soybean oil. This newly forged trade route is likely to become busier, as China returns to buying US soybeans after last month’s trade truce, and relations between Beijing and New Delhi improve.
The trade makes logistical sense for India, said Aashish Acharya, a vice president at Patanjali Foods Ltd., one of the country’s top vegetable-oil buyers. “Quality is comparable with South American supplies, prices are competitive and Chinese exporters are seeking reliable buyers.”Chinese soybean oil is trading at a discount of $10 to $15 a tonne to that from South America, and can reach India’s east coast in about 10 to 12 days, compared with the 50- to 60-day journey from Brazil and Argentina, Acharya said.
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Imports from China are at about 70,000 tonne so far in November and could increase by another 12,000 tonne by month-end, he said. They are expected to reach about 350,000 tonne in the six months through April, making the country the third-largest supplier to India over the period, Acharya said.
China is the world’s biggest producer of soybean oil, churning out around 20 million tonne a year. It used to consume nearly all of that output at home, often having to resort to imports to meet local demand. But as the economy has cooled, people have cut back on eating out, damping soyoil consumption from restaurants.
The trade is being abetted by a glut of soybean oil that’s built up in China. Commercial stockpiles were at more than 1 million tons in mid-November, a seven-year high for that time of year, commodities consultancy Mysteel said in a note. Chinese crushers are expected to maintain a high level of activity, and it will take time for local demand to recover, it said.
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