Insights 
VT 
China’s President Xi reportedly held phone talks with Brazil’s President Lula, reported by China’s state media. This follows Trump’s call for an increase in China’s soybean purchases from the US, raising concerns for Brazil, which has been a leading supplier of soybeans to China.
Currently, China, the largest global soybean buyer, faces challenges due to market oversupply. Despite record imports in early 2025, China is dealing with weak demand and an extended supply peak from Brazil, resulting in abundant supply heading into Q4, during the US peak marketing season.
China’s Soybean Oil Exports
In the first half of 2025, China’s soybean oil exports reached roughly 127,000 tons, exceeding all of 2024’s exports. Xi and Lula’s conversation likely covered soybean trade, as Trump pushes for increased purchases as a goodwill gesture to improve trade talks.
The US challenge to Brazil’s exports to China seems minimal, especially after Phase One deal issues. In June, China imported 9.73 million tons of Brazilian soybeans, a record for the month, while only importing 724,000 tons from the US. Amid the supply glut, China has not booked new US soybean cargoes for Q4, citing “uncertainty on trade negotiations.”
Despite Trump’s advocacy, the current market situation is not ideal for China to increase US purchases. Brazil’s market share appears secure, with historical patterns showing China may temporarily boost US imports before returning to Brazil as a primary supplier.
Given the massive supply glut in China, we see a bearish outlook for soybean prices in the coming weeks. China’s port inventories have swelled, with recent data from early August 2025 showing stocks hovering near 8 million metric tons, well above the five-year average for this time of year. This oversupply, driven by record Brazilian imports, will likely pressure soybean futures contracts, such as the November (ZSX25) contract, as we approach the U.S. harvest.
Impact on Soybean Prices
Political statements from the U.S. calling for more Chinese purchases might create temporary price spikes. However, we view these as politically motivated and not reflective of China’s actual demand, which remains weak. Therefore, any rally based on trade negotiation headlines should be seen as an opportunity to sell or establish short positions, as the underlying fundamentals of oversupply are likely to reassert control.
The friction between U.S. political pressure and Chinese market reality is creating significant uncertainty, which will keep volatility high. We’ve seen this reflected in options markets, with the CBOE Soybean Volatility Index (SOYVIX) trading near its yearly highs throughout July and into August 2025. Traders should be prepared for sharp price swings and consider strategies that can benefit from this choppiness.
We are also watching the crush spread, which is the profit margin for processing soybeans into meal and oil. With China now exporting soybean oil, it signals that domestic demand for soybean products is saturated and processing margins are likely to get squeezed. This suggests a bearish position on the crush spread, betting that the value of raw soybeans will fall faster than the value of its processed products.
Looking back at the 2019-2020 period gives us a useful roadmap for how this may unfold. During that time, China made some goodwill purchases of U.S. soybeans to ease trade tensions but quickly returned to Brazil as its primary, more reliable supplier once political pressures subsided. We expect a similar pattern now, where any significant buying from the U.S. will be temporary and unlikely to shift the larger market trend away from Brazilian dominance.
