The U.S. share of the Chinese soybean market shrank during the marketing year that ended Aug. 31 and, with the trade war underway, shipments are anemic in the new sales year, says the USDA: “A large pullback in Chinese demand for U.S. soybeans appears likely to continue well into 2918/19.”
In its monthly Oilseeds: World Markets and Trade report, the USDA said retaliatory tariffs shut down soybean sales. Only 67,000 tonnes of soybeans were exported to China during September, the first month of the 2018/19 trade year, compared to 3 million tonnes during September 2017. “Weekly shipments to the rest of the world were 1.6 million tonnes above last year; however, they did not fully offset reductions to China … the ability for the rest of the world to make up for typical exports to China will be tested.”
The USDA estimated the U.S. accounted for 29 percent of China’s soybean imports in 2017/18, down 10 percentage points in a year. Meanwhile, Brazil’s market share zoomed to 66 percent in 2017/19, up 18 points. “The United States and Brazil are the primary soybean suppliers to China” and each typically makes large sales following their harvest season. “The implementation of retaliatory tariffs led to an adjustment of trade flows in global soybean markets,” said USDA. “Trade tensions between the United States and China will continue to affect soybean and soybean products in2018/19.”
To offset Chinese tariffs, the Trump administration announced up to $4.7 billion in payments to producers of soybeans, cotton, pork, dairy, sorghum, wheat and corn, along with spending $1.2 billion to buy, and give away, surplus food, and $200 million for export promotion. An analysis by four university economists said only soybeans, pork and corn have seen declines in their estimated value of production following the start of the trade war. “Changes in projected value of production are a reminder that tariffs conflict is only one factor impacting the value of U.S. farm commodities,” wrote the economist at the farmdoc Daily blog.
“In particular, per usual, weather is a notable factor: From severe drought in Argentina, Northern Europe, and Australia to exceptional yields in much of the US and southern Europe. For current production, impact of the tariff conflict awaits the crop being planted in South America. Very different scenarios emerge if the South American crop is at or above vs. below trendline. Intermediate impact depends on whether the tariff conflict pushes China’s economy into recession, how impact on soybeans radiates out to other crops, plus unforeseen positive and negative events.”