Ahead of Xi's US visit, China's soybean crushers face high costs, weak margins

• Chinese state traders bought 11 million metric tons of U.S. soybeans after Xi's May meeting with Trump, but private crushers have avoided U.S. supplies due to the 10% tariff making them unprofitable
• Brazil has limited capacity to fill the gap, with 85% of the 2025/26 crop already sold and strong domestic demand competing with exports; Brazil's shipments to China are down 2.6 million tons year-over-year through August
• Even excluding the tariff, U.S. soybean imports for October-January would generate negative crush margins of $22-34 per ton at current prices, while China's pig herd contraction further weakens feed demand

Summary: China's Soybean Crushers Face Supply Squeeze and Margin Pressure

Chinese private soybean processors are confronting a critical supply crunch in Q4 as Brazilian inventories tighten and U.S. tariffs restrict access to American cargoes. The world's largest oilseed processing industry is operating under negative crush margins while facing weakening demand from China's shrinking pig herd.

Key Developments:

• Chinese state-owned traders purchased approximately 11 million metric tons of U.S. soybeans following Xi Jinping's May meeting with President Trump
• Private crushers have largely avoided U.S. supplies due to a 10% import tariff on American agricultural goods
• President Xi's upcoming Washington visit this month may provide tariff relief, though uncertainty remains

Market Data:

• U.S. soybean futures have risen nearly 12% from June lows
• Brazilian soybeans for November delivery quoted at $3.15-$3.20 premium per bushel to CBOT futures
• Crush margins for October-December shipments are 150-230 yuan ($22.35-$34.27) per ton in the red, even excluding the 10% tariff
• Brazilian farmers have sold 85% of the 2025/26 crop (versus 78% last year)

Supply Constraints:

• Brazil's soybean loadings to China through August 25 dropped 2.6 million tons year-over-year
• Brazil's next harvest won't arrive until early 2027
• Argentina provided an additional 7.9 million tons (up 92.4% from 2024), but this buffer is expected to diminish in 2026
• November import bookings stand at 4.8 million tons, only 60% of projected demand

Industry analysts indicate private crushers will require either tariff reductions or state reserve auctions to maintain operations through the supply-constrained period.