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Which card will China play?

Kenan Layden - FFMC - Tue Oct 7, 10:49AM CDT

Soybean futures currently remind me of an episode of “It’s Always Sunny in Philadelphia” in which Charlie is assigned the role of “wildcard” in a scheme to buy gas and sell it at a markup. In the episode, Charlie cuts the transport vehicle brake line (containing all the gas), causing a crash and loss of all of the gas that was purchased with a bank loan.

China holds the wildcard for soybeans. Without Chinese business, exports so far have been disappointing.

Export inspections for the 2025-26 marketing year are at 82.5 million bushels, a slow pace but still ahead of last year.

Export sales through the first three weeks are behind last year and are the lowest since 2008.
Export sales through the first three weeks are behind last year and are the lowest since 2008.

 

Exports are not ideal, but what if China does come in and buy soybeans?
Exports are not ideal, but what if China does come in and buy soybeans?

Market key: Stocks-to-use ratio

Currently, stocks-to-use ratio is not high. Prices have been substantially higher in years with greater stocks-to-use ratios (#2 in graph below). However, the export number for the 2025-26 year (#3 in graph below) can change based on China. If China comes in and buys soybeans this export number could increase, leading to tighter stocks. If China can meet its soybean demand with purchases from South America, this export number could drop, leading to a large stocks-to-use and no home for U.S. soybeans.

Will China have no soybean purchases from the United States, in effect cutting the brake line and leading to a U.S. soybean market crash? Or does the line leading from U.S. to China stay intact (somewhat, maybe only for the time being) leading to a supportive market?

Soybean supply and use 2021-2025
*Note #1 shows updated stocks numbers from September grain stocks report

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