Soybean market shifts from normal patterns

The trade war may be sending more Canadian beans to China, but industry worries U.S. beans are also moving north

It appears that Canadian soybeans are gaining market share and attracting higher prices in China but are getting hammered in other markets, including at home, by cheap American product.

That conclusion is based mainly on rumours, logic and circumstantial evidence. Ron Davidson, executive director of Soy Canada, will be looking for more concrete evidence as Statistics Canada’s 2018-19 soybean export numbers become available.

“We need the hard numbers to really find out what is going where and what the price impact is,” he said.

His suspicion is that the trade row between the United States and China has disrupted trade flows for the commodity because the U.S. now faces a 25 percent tariff shipping its soybeans to China, the world’s top buyer.

The most recent Statistics Canada data is for September, so it is hard to get a bead on what is happening just two months into the crop year, especially since it was a late harvest with a lot of crop coming off in October.

The Canadian Grain Commission publishes weekly statistics but the data doesn’t reveal the detail about where the crops are heading.

What it does show is that 1.8 million tonnes of soybeans have been exported through week 16 of the crop year, which is 200,000 tonnes more than the same time last year.

And there have been some big weeks, such as week 15 when 395,100 tonnes were shipped, which is the equivalent of the wheat and canola exports combined for that week.

Davidson doesn’t know for certain but he suspects Canada is picking up some of the Chinese market at the expense of U.S. producers.

“I’ve always expected that we would ship some more product to China and probably at a somewhat higher price because the Americans are aggressive everywhere else,” he said.

Despite picking up some business in China, a market that typically buys about two million tonnes of Canadian soybeans annually, Canadian soybean producers would be happier if normal trade patterns resumed.

“Even though there is gain in China, there is pressure everywhere else including the domestic market with U.S. beans coming in,” said Davidson.

That is because U.S. soybean producers are receiving a US$1.65 per bushel government subsidy, half of which has already been paid out, to help offset the loss of the Chinese market.

That subsidy, along with a record 125 million tonnes of production, has made U.S. soybeans a bargain compared to product from other exporting regions.

Davidson said there are rumours that a lot of U.S. soybeans are spilling north of the border into Canada.

Export sales data compiled by the U.S. Department of Agriculture’s Foreign Agricultural Service confirm the rumours. It shows that there have been 558,064 tonnes of U.S. soybean sales to Canada through Nov. 15 of the 2018-19 crop year.

By comparison, sales to Canada for the same time frame in the previous five crop years have ranged from 114,074 tonnes to 212,987 tonnes. So it is clear that a lot more soybeans than normal are heading north.

Davidson said it is unlikely that the U.S. soybeans are using Canada’s grain handling system to move to China because they would be identified as U.S. beans when they enter the elevator network and that would be indicated on the export certificate.

It is more likely that they are displacing Canadian soybeans in the domestic crush.

“I’m not in the business but there’s a logic to that,” he said.

“There is an expectation that we would be crushing a lot of U.S. soybeans this year and that the Canadian soybeans would be going for export.”

Soy Canada plans on lobbying the Canadian government when there is statistical proof of what changes are happening in the soybean trade.

Davidson said it is doubtful that the increased market share and prices in China are making up for the decrease in other markets and at home due to the lucrative $1.65 per bu. subsidy.

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