On August 11, news that Russia would lower tariffs on related agricultural products roiled the commodities market. Coincidentally, the People's Bank of China's sharp downward revision of the RMB central parity rate during the same period also gave some agricultural products a different performance. Zhuochuang Information told a Securities Daily reporter that, affected by the RMB depreciation, Chicago soybean futures surged 3.5% on Monday before plunging 2.6% on Tuesday. Apart from the impact on the futures market, soybean imports are also expected to be "badly hurt" later on. As the world's largest buyer of soybeans, China has had an import dependence rate for soybeans above 50% over the past 15 years; especially in the past six years, China's foreign dependence on soybeans has exceeded 80%, and in 2014 the foreign dependence rate was around 86%. Without considering foreign exchange arbitrage, if domestic soybean traders import soybeans at the latest exchange rate, the cost per vessel increases by about 3 million yuan. Although importing enterprises can use foreign exchange arbitrage tools to reduce exchange losses, if the RMB continues to depreciate, enterprises' import costs will face the risk of a sharp rise.
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On August 11, news that Russia would lower tariffs on related agricultural products roiled the commodities market.</p>
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Coincidentally, the People's Bank of China's sharp downward revision of the RMB central parity rate during the same period also gave some agricultural products a different performance. Zhuochuang Information told a Securities Daily reporter that, affected by the RMB depreciation, Chicago soybean futures surged 3.5% on Monday before plunging 2.6% on Tuesday. Apart from the impact on the futures market, soybean imports are also expected to be “badly hurt” later on. As the world's largest buyer of soybeans, China has had an import dependence rate for soybeans above 50% over the past 15 years; especially in the past six years, China's foreign dependence on soybeans has exceeded 80%, and in 2014 the foreign dependence rate was around 86%. Without considering foreign exchange arbitrage, if domestic soybean traders import soybeans at the latest exchange rate, the cost per vessel increases by about 3 million yuan. Although importing enterprises can use foreign exchange arbitrage tools to reduce exchange losses, if the RMB continues to depreciate, enterprises' import costs will face the risk of a sharp rise.</p>
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Soybean imports remain at a high level</p>
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A Securities Daily reporter learned from Zhuochuang Information that Russia has stated that, in order to honor its commitments to the World Trade Organization (WTO), it will continue to gradually lower export tariffs on major oilseeds, starting from September 1, 2015. The soybean export tariff will drop to zero, and the rapeseed export tariff will drop to 6.5%, but no lower than 11.4 euros per ton. The sunflower seed export tariff will drop to 9.88%, but no lower than 14.81 euros per ton.</p>
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In this regard, Zhuochuang Information believes this may change the pattern of China's sources for imported soybeans.</p>
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A Securities Daily reporter checked data from the General Administration of Customs. Looking at import volume data, soybean imports showed a surge in July. The data shows that 9.5 million tons of soybeans were imported in July, while from January to July cumulative imports reached 44.66 million tons, with import volume up 7.1% year on year and value down 19.7% year on year.</p>
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Checking data from other months so far this year shows that although soybean import data fluctuated repeatedly in the first half of this year, with differing degrees of year-on-year increases and decreases, the July import volume increased noticeably when the data are ranked.</p>
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Separately, media reports said the surge in soybean imports was mainly because South American soybeans were cheap, stimulating increased purchasing demand from Chinese buyers. The China National Grain and Oils Information Center forecasts that soybean imports in August and September will total 13 million tons, higher than 11.06 million tons in the same period last year.</p>
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Corresponding to the surge in imports is the continuous shrinking of the domestic soybean market. The China National Grain and Oils Information Center expects China's soybean output next year to fall to 11 million tons, below this year's 12.15 million tons.</p>
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While news of Russia's tariff cut is still echoing, the RMB depreciation has added another layer of meaning to soybean import and export business. “The RMB has depreciated continuously for two days by a relatively large margin, which is a major positive for foreign trade enterprises. In recent years, the RMB has kept appreciating, while international market demand has been sluggish, dealing a relatively large blow to China's exports. In July this year, exports fell 8.3% year on year. After the RMB depreciation, the price advantage of China's exported goods will be somewhat strengthened, which is conducive to improving the performance of foreign trade enterprises. In fact, the main purpose of this central bank-led RMB depreciation is to promote exports.” Guo Fanli, research director at China Venture Consulting, explained to Securities Daily. Specifically for agricultural enterprises, Guo Fanli believes enterprises should actively raise the added value of their products and develop mid- to high-end business. This RMB depreciation is a good opportunity for China's agricultural processing import and export enterprises to rebuild their brand image. Agricultural processing import and export enterprises can export some mid- to high-end products, and because of the RMB depreciation, these mid- to high-end products are expected to be welcomed by the market for their relatively high cost-performance ratio. Once foreign markets have relatively high recognition of China's exported mid- to high-end products, even if the RMB appreciates in the future, it will not have a relatively large impact on agricultural processing import and export business.</p>
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Some agricultural analysts also explained in interviews with Securities Daily that the current agricultural production model determines that domestic soybeans regaining market share will not happen overnight.</p>
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The phenomenon of “concentrated arrival at ports” will continue</p>
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Changes in the soybean market structure have also given the current market clear characteristics. A research report from Guotai Junan shows that China's soybean imports continue to show the phenomenon of “concentrated arrival at ports”; therefore, China's soybean imports are expected to fall month on month in August, but in absolute terms they are still expected to remain in a high range.</p>
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Because China's soybean imports surged in July, setting the highest monthly import volume ever recorded. Guotai Junan believes that in the first seven months of 2015, there were some keywords to follow in global soybean trade: China's soybean imports will fall month on month in August, with import volume estimated at around 8 million to 8.5 million tons; China's soybean import volume once again set a record high for the same period in history, and China's soybean imports are expected to gradually decline in August.</p>
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Now, with changes in Russia's soybean export tariff policy, the market structure may also change. Zhuochuang Information believes that China's main soybean importing countries are currently the United States, Brazil and Argentina. Looking at import data from the first half of the year, the three countries accounted for 97% of import volume, while Russia accounted for only 0.72%. However, affected by Russia's soybean exports soon facing zero tariffs, “plus the fact that in recent years farmers in Northeast China have tended to go to Russia to grow soybeans, it is expected that China's soybean imports from Russia will increase somewhat later on.”</p>
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On August 11, news that Russia would lower tariffs on related agricultural products stirred up the commodities market.
Coincidentally, the news that the People's Bank of China sharply lowered the RMB central parity rate during the same period also gave some agricultural products a different performance. Zhuochuang Information told a Securities Daily reporter that, affected by the depreciation of the RMB, Chicago soybean futures surged 3.5% on Monday and then plunged 2.6% on Tuesday. Apart from the impact on the futures market, soybean imports are also expected to be "badly hurt" later on. As the world's largest buyer of soybeans, China's soybean import dependence has been above 50% for the past 15 years, and especially over the past six years, China's foreign dependence on soybeans has exceeded 80% every year, with foreign dependence at around 86% in 2014. Without considering foreign exchange arbitrage, if domestic soybean traders import soybeans at the latest exchange rate, the cost per shipment increases by about 3 million yuan. Although importing enterprises can use foreign exchange arbitrage tools to reduce exchange losses, if the RMB continues to depreciate, enterprises' import costs will face the risk of a substantial rise.
Soybean imports remain high
A Securities Daily reporter learned from Zhuochuang Information that Russia has stated that, in order to comply with its commitments to the World Trade Organization (WTO), it will continue to gradually lower export tariffs on major oilseeds, starting to reduce export tariffs on major oilseeds from September 1, 2015. The soybean export tariff will be reduced to zero, and the rapeseed export tariff will be reduced to 6.5%, but no lower than 11.4 euros per ton. The sunflower seed export tariff will be reduced to 9.88%, but no lower than 14.81 euros per ton.
In response, Zhuochuang Information believes that this may change the pattern of China's sources of imported soybeans.
A Securities Daily reporter checked data from the General Administration of Customs. Judging from the import volume data, soybean imports showed a surge in July. The data show that 9.5 million tons of soybeans were imported in July, while from January to July, cumulative imports reached 44.66 million tons, with import volume up 7.1% year on year and value down 19.7% year on year.
Checking data from other months of this year shows that although soybean import data fluctuated repeatedly in the first half of this year, with differing degrees of year-on-year increases and decreases, the July import volume increased markedly when the data are ranked.
According to another media report, the surge in soybean imports was mainly because South American soybeans were cheap, which stimulated increased purchasing demand from Chinese buyers. The China National Grain and Oils Information Center predicts that soybean imports in August and September will total 13 million tons, higher than 11.06 million tons in the same period last year.
⟧ Corresponding to the surge in imports is the continuous shrinkage of the domestic soybean market. The China National Grain and Oils Information Center expects China's soybean output to fall to 11 million tons next year, lower than 12.15 million tons this year.
While the news of Russia's tariff cut was still echoing, the depreciation of the RMB added another peculiar dimension to soybean import and export business. "The RMB has continued to depreciate substantially for two days, which is a major positive for foreign trade enterprises. In recent years, China's RMB has kept appreciating, while international market demand has been sluggish, which has dealt a relatively large blow to China's exports. In July this year, exports fell 8.3% year on year. After the RMB depreciates, the price advantage of China's export goods will be somewhat strengthened, which is conducive to improving the performance of foreign trade enterprises. In fact, the main purpose of the central bank's move to guide the RMB depreciation this time was to promote exports." Guo Fanli, research director of CIC Consultant, explained to Securities Daily. Specifically for agricultural enterprises, Guo Fanli believes that enterprises should actively raise the added value of their products and develop mid- to high-end business. This RMB depreciation is a good opportunity for China's agricultural processing import and export enterprises to reshape their brand image. Agricultural processing import and export enterprises can export some mid- to high-end products to other countries. Because of the RMB depreciation, these mid- to high-end products are expected to be welcomed by the market for their relatively high cost-performance ratio. Once foreign markets have a relatively high degree of recognition for China's exported mid- to high-end products, even if the RMB appreciates in the future, it will not have a major impact on agricultural processing import and export business.
Some agricultural analysts also explained in interviews with Securities Daily that the current agricultural production model determines that domestic soybeans will not regain the market overnight.
The phenomenon of "concentrated port arrivals" will continue
Changes in the soybean market structure have also given the current market obvious characteristics. A research report from Guotai Junan shows that China's soybean imports continue to show the phenomenon of "concentrated port arrivals." Therefore, China's soybean imports are expected to fall month on month in August, but in absolute terms they are still expected to remain in a high range.
Because China's soybean imports surged in July, hitting the highest monthly import volume ever recorded. Guotai Junan believes that in the first seven months of 2015, there are some keywords to follow in global soybean trade: China's soybean imports fell month on month in August, with imports estimated at around 8-8.5 million tons; China's soybean imports once again refreshed a record high for the same period in history, and China's soybean imports are expected to gradually decline in August
Now, with changes in Russia's soybean export tariff policy, the market structure may also change somewhat. Zhuochuang Information believes that China's main soybean importing countries at present are the United States, Brazil and Argentina. Judging from import data for the first half of the year, the three countries accounted for 97% of import volume, while Russia accounted for only 0.72%. However, affected by Russia's soybean exports soon facing zero tariffs, "combined with the tendency of farmers in Northeast China in recent years to go to Russia to grow soybeans, China's soybean imports from Russia are expected to increase later on."