The giant of world soybean trade, China, will slash its soy imports by 10 percent this trade year under the dual effects of a trade war with the United States and an outbreak of African swine fever, said the U.S. agriculture attache in Beijing. At the same time, USDA data show a sharp decline in soybean exports to all markets and a trade group said tit-for-tat tariffs are putting pressure on pork sales to China and Mexico.
President Trump and his policy of trade confrontation are popular in farm country although many producers worry about the impact on their income. The common solace is that short-term pain will be worth the long-term gains of more advantageous trade rules.
At the end of November, the USDA will update its estimates of farm income, now forecast as the second-lowest since 2006, and of ag exports, which generate 20 cents of each $1 in farm income. In August, exports were forecast to be the second-highest ever, despite a nearly 40 percent drop in sales to China.
“Although U.S. soybeans remain within a competitive price range even with the additional 25 percent tariff, many importers have shared that they are unwilling to risk facing possible administrative barriers to U.S. soybean imports to Chinese ports,” said the attache report. “Importers also are wary of making what may be perceived in China as a political statement in deciding to purchase U.S. soybeans during the ongoing U.S.-China trade dispute.”
The report, written by Abigail Nguema, forecast China would import 85 million tonnes of soybeans in the 2018/19 marketing year, compared to 94 million tonnes in the previous year. China is actively seeking alternatives to imported soybeans in livestock feed as well as reducing the protein content of feed, said the report. The outbreak of African swine fever, often fatal to hogs, is expected to have minor downward impact on feed usage. Attache reports are not official USDA data.
At present, the USDA forecasts China will import 94 million tonnes of soybeans in 2018/19, similar to the two preceding marketing years. Before the trade war began, China was forecast to import 103 million tonnes of soybeans this trade year. The USDA will revisit its import forecast for China on Thursday as well as its estimate for U.S. soybean exports, which was scaled back by 10 percent since the trade war began.
Usually, half of the U.S. soybean crop is exported. A much smaller share, roughly 44 percent, is forecast this year, according to a USDA forecast in early October. Sales data show the drop off.
The weekly U.S Export Sales report, issued each Thursday by USDA, says 21.45 million tonnes of U.S. soybeans have been sold or exported worldwide since the 2018/19 marketing year opened on Sept. 1, compared to 30.32 million tonnes at the same point a year ago. The tally of “total commitments” — sales and exports — to China is just under 1 million tonnes this year, vs. nearly 16 million tonnes at the end of October 2017.
Pork exports, tracked on a calendar year, are down by 4 percent from 2017’s level, according to USDA. The trade-promoting U.S. Meat Export Federation says export volume is strong “but unfortunately the obstacles U.S. pork faces in China and Mexico are putting a lot of pressure on export value.” Revenue from sales to Mexico is down by 8 percent for the first nine months of the year, to $1.01 billion. Sales to China/Hong Kong were down by 14 percent, to $668 million. One-fifth of U.S. pork is exported.
With exports slowing, U.S. soybeans are going into storage in hopes of stronger demand and higher prices in the future. A grain handler in North Dakota, Arthur Companies, is piling 1 million bushels of soybeans on the ground while waiting for the market to improve. “We’re sitting on the edge of our seat,” general manager Kevin Karel told the New York Times.
China has leaned heavily on Brazil, the No. 1 soybean exporter and second to the United States as a soybean producer, to offset U.S. supplies.