Crushers in Brazil are running out of soybeans amid tougher competition from Chinese buyers for the remaining 2017-18 season supplies. Since export prospects remain favorable, crushers may need to turn to imported soy-oil to meet domestic demand.

Brazilian crushers have been working with negative margins since the second half of September, leading some to slow the pace of processing, according to Cepea, the University of Sao Paulo’s research arm. The soy rally that saw a doubling of premiums this year is squeezing domestic processors. According to some news published by Bloomberg, other plants have halted activities, with some considering resuming only when the new harvest begins in the first quarter of 2019, said Debora da Silva, an analyst at Cepea. “Soy-product inventories are low, and some plants are signaling they no longer have soybean-oil to sell,” she said. Brazil’s soybean inventories are expected to fall to 1.5 million tons this season, the lowest since 1999. That’s a result of increasing demand from China amid a trade war with the U.S. and higher exports of soy products earlier this season to fill the gap left by a slump in Argentine production after the worst drought in decades. Brazil shipped 69.2 million tons of soybeans through September this year, up 13 percent from a year earlier, Trade Ministry data show. In September, exports totaled 4.6 million tons, of which 91 percent went to China. Since export prospects remain favorable, crushers may need to turn to imported soy-oil to meet domestic demand, Silva said.