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Chinese soybean processors are facing mounting cost pressures and shrinking profit margins as President Xi Jinping prepares to visit the United States later this month. With a 10% import tariff in place, the world's largest vegetable oil processing industry is increasingly turning away from U.S. soybeans, while tightening stocks in Brazil are making alternative supplies harder to secure.
Industry players are hoping that Xi's meeting with U.S. President Donald Trump could open the door to a reduction in the tariff on American agricultural products, a move that would significantly reshape soybean trade flows between the two countries. U.S. Trade Representative Jamieson Greer said the two leaders would announce several agreements related to agriculture and non-tariff barriers at the summit, though he did not specify which policies would be addressed.
'As parts of South America approach the end of their marketing season, private processors will need access to U.S. soybeans,' said Johnny Xiang, founder of AgRadar Consulting in Beijing. According to Xiang, access to U.S. supplies will hinge either on tariff relief or on auctions of soybean reserves by Sinograin, the state-owned food reserve company, to keep processing plants running.
The prospect of tariff relief, however, remains far from certain. A representative of a China-based soybean processor told Reuters: 'We are not considering U.S. soybeans because of the tariffs.' The source added, 'If tariffs are reduced, we will recalculate processing margins to assess whether importing U.S. soybeans would be profitable.'
Chinese state-owned traders have purchased around 11 million tonnes of U.S. soybeans since Xi and Trump met in May, but private processors have largely avoided North American cargoes because of the import duties. Adding to the pressure, U.S. soybean futures have risen nearly 12% from their June low, driven by adverse weather in the United States, Chinese state purchases, and concerns that the El Niño phenomenon could disrupt global supplies.
On the price front, Brazilian soybeans for November delivery are being offered at a premium of US$3.15 to US$3.20 per bushel over November soybean contracts on the Chicago Board of Trade, including costs and delivery to China. U.S. Gulf soybeans, in contrast, are quoted at US$3.20 to US$3.25 per bushel before tariffs. Even though U.S. soybean prices are higher than Brazilian supplies, buyers expect the upcoming U.S. harvest to lift availability and pressure prices lower.
'The final price of U.S. soybeans remains highly uncertain, as large-scale purchasing demand from China has yet to emerge,' Xiang said.
Brazil also has limited room to boost soybean sales to China in the fourth quarter of 2026, as demand from other buyers and robust domestic processing activity are squeezing exportable supplies. Brazilian farmers had sold around 82% of their 2025/2026 soybean production by the end of July, up from 78% a year earlier, and that figure is now estimated to be approaching 85%. Brazilian domestic processors are competing aggressively with exporters and have at times offered prices above export parity.
Brazilian soybean shipments to China through 25 August were down by 2.6 million tonnes from a year earlier, while shipments to other countries rose by 6 million tonnes. Argentina has emerged as an additional source, supplying 7.9 million tonnes of soybeans to China in 2025, up 92.4% from 2024, though this volume is expected to decline in 2026 without similar policy incentives.
Supply pressures are intensifying as China's October purchases are largely complete. Importers have secured 4.8 million tonnes for November delivery, equivalent to roughly 60% of projected requirements, while purchases for December and January remain limited. Against this backdrop, processing margins stay negative. Excluding the additional 10% tariff, theoretical processing margins for Brazilian and U.S. soybeans for October to December delivery stood at minus 150 to 230 yuan, equivalent to roughly US$22.35 to US$34.27 per tonne.
Source: idnfinancials.com