Analysis of the Influence of Chinese Demand on the Futures P

  • Jan, 11th 2019

With the rapid development of China's social economy, the demand for oil and agricultural products, which is mainly represented by soybeans, has increased rapidly, while the domestic production has not increased correspondingly, resulting in its increasing dependence on imports. It has become a major importer of soybeans in the world. In 2017, China's total soybean imports reached 95.54 million tons, mainly imported to Brazil and the United States. Among them, soybeans imported from Brazil reached 50.93 million tons, accounting for 53%, and imports from the United States 3285. Ten thousand tons, accounting for 34%. At the same time, China is also the largest export destination of US soybeans. According to the US Department of Agriculture (USDA) data, in 2017, the United States exported 53 million tons of soybeans, of which exports accounted for more than half of China's total. In terms of terms, China’s needs are particularly important.

Appendix 1: China's imports of soybeans by country

Entering the early 2018, the market originally hoped for further growth of China's demand, after the industry once predicted China's annual import The volume will exceed 100 million tons, which will help to increase the export volume of US soybeans. Unexpectedly, the plan could not keep up with the changes, and the "black swan" incident involving the Chinese demand in the US soybean market - the Sino-US trade war broke out. As we all know, the emergence and impact of the Sino-US trade war is far-reaching, the global economic development situation has changed, and the agricultural product market has also been affected. Soybeans are the first to bear the brunt. In fact, it has re-adjusted the global soybean trade order, as China imposed a 25% tariff on imported US soybeans during the period, which led Chinese buyers to increase the purchase of South American soybeans, which directly pushed up the South American soybean premium. Other countries have abandoned high-priced South American soybeans and switched to relatively cheap US soybeans. At the same time, they have also prompted China to actively expand new sources of soybean imports, such as Russia and the ASEAN Free Trade Area. Not only that, but it has also caused the growth of China's soybean imports, which has lasted for many years, to come to an abrupt end, and there has been a long-lost decline. According to China Customs data, the total amount of soybeans imported from China during January-November 2018 reached 82.3 million tons. Not as good as 85.99 million tons in the same period last year. This has also led to the official promotion of low-protein diet feed technology in the production of pigs, broilers and laying hens in order to effectively reduce the amount of soybean meal, and to import a large amount of uk while importing restrictions on the import of Indian leeks.Other miscellaneous clams such as orchid flower buds and Canadian oysters are used instead of soybean meal. It was the previous Sino-US trade war that led to a weakening of Chinese demand, and speculative funds also staged a “multiple emptying” in the CBOT soybean futures options market. Under this background, CBOT soybean futures prices from CME Group hit a high in the year from the beginning of March. Gradually fell back and fell below the 1000-cent mark support level, of which the March contract fell to a minimum of 839.75 cents, a decline of more than 21.6% from the high level in early March.

Appendix 2: US Bean Chart

From the beginning of December 2018, the G20 Leaders' 13th Summit was held in Argentina as scheduled, China and the United States The heads of state have been officially meeting since the trade war for more than a year and reached an important consensus. They decided to suspend the further escalation of the trade war on January 1, 2019, including no longer raising the existing tariff rate against each other, and not introducing other commodities. With the new tariff increase measures, China agreed to immediately start purchasing from the United States unrecognized but very large quantities of agricultural, energy, industrial and other products. In addition, the two heads of state also instructed the economic and trade teams of the two sides to intensify consultations in the next three months, reach an agreement, cancel the tariffs imposed this year, and push bilateral economic and trade relations back to normal track as soon as possible to achieve a win-win situation. Sino-US temporarily suspended the war, and soon Sino-US trade negotiations showed signs of progress. For example, the first batch of US soybeans purchased by China in six months on December 12 is an important evidence. The CBOT soybean March contract price is also boosted by Chinese demand. Above 900 cents, the highest rebounded to 941 cents, up 10.8% from the previous low of 839.75 cents. However, the time shift is easy. As the number of Chinese soybeans purchased by China and the United States is lower than previously expected, the market believes that this amount is difficult to help digest the huge ending stocks of US soybeans. The pressure is looming. For this reason, the CBOT soybean price rebounded and then fell back to 900 cents in the middle and late December. The contract ended in late March 31 and finally closed at 895 cents, up from the previous high of 941 cents. 5% down.

Looking ahead to the market, the new trend of Sino-US trade consultation is still crucial to the US price trend. According to informed sources, the US government will send a delegation to Beijing on the 7th of January to hold trade talks with Chinese officials. This will be from both China and the United States.Since the two heads of state reached a tentative truce agreement in Argentina in early December, they held talks for the first time in person. If the Sino-US trade war is successfully resolved, the US soybean futures price is expected to rebound moderately, but the current global soybean supply is abundant and the African feed demand is weakening or the demand for soybeans in the later period is weak. In this context, unless the South American crop The harvest period encountered severe adverse weather, otherwise the US soybean price recovery space is expected to be limited, and the pressure level around the 1000 cent mark will be an important resistance level.