Full recovery not expected for U.S. soy exports to China

The government is predicting a major increase in Chinese imports once trade war ends, but producers aren’t so sure

ORLANDO, Fla. — American soybean groups are not as confident as their political leaders that China will end up buying more U.S. soybeans than it did before the trade war.

U.S. Agriculture Secretary Sonny Perdue told farmers attending the recent 2019 Commodity Classic conference that a trade deal with China would create a “bonanza” for American soybean growers.

He later told reporters he is hopeful that annual U.S. agriculture exports to China will double or triple once an agreement is in place.

Bloomberg has reported that China is proposing to buy an extra US$30 billion a year of U.S. agriculture products once the two countries reach a deal, causing some market analysts to forecast a prolonged bull run in soybeans and other commodities.

However, senior officials with soybean commodity groups were not nearly as optimistic.

Davie Stephens, president of the American Soybean Association, said the trade spat with China will have a lingering effect.

“There is no question that 25 percent tariff on American soybeans will have a lasting and negative impact,” he told reporters during a news conference at the Commodity Classic.

“The ongoing feud has caused both short-term and long-term damage to U.S. soybean prices and our market in China.”

Executives of the U.S. Soybean Export Council shared the view that there has been lasting damage.

“We’re optimistic China will come back, but I don’t know if it will come back at the same pace that it was before,” said chief executive officer Jim Sutter.

The Chinese government advised farmers to reduce protein levels in their hog rations and they complied, switching from soy meal to sunflower and rapeseed meal.

African swine fever is also taking a toll on soy demand. Sutter believes that between those two factors, total Chinese soy imports will be cut by at least 10 million tonnes.

Paul Burke, senior director of U.S. soy marketing, said when the dispute is over China will once again be the largest market for U.S. soybeans, but he doubts the country will import 36 million tonnes like it did two years ago.

He said the dispute will result in increased production from Brazil, Uruguay, Paraguay, Canada and the Black Sea region. As well, the U.S. will be viewed as an unreliable supplier because political tensions could flare up again.

The council has refreshed its international marketing strategy, partially in response to the China situation.

U.S. farmers export 60 percent of the soybeans that they grow. One in every three rows used to go to China.

Even if China comes back, the council wants to reduce grower dependence on that one market.

The council scored 232 global markets on factors such as population, economics and protein consumption and identified 48 markets where it wants to conduct market development activities.

The council narrowed that list down to 14 priority markets: Algeria, Bangladesh, Egypt, El Salvador, Honduras, India, Morocco, Myanmar, Nepal, Nicaragua, Nigeria, Pakistan, Sri Lanka and Tunisia.

They are immature, basic markets with low levels of protein consumption but plenty of potential.

“If we can help them speed their (protein) demand growth, that’s where we’ll see the biggest bang for our buck,” Sutter told soybean growers attending a session at the Commodity Classic.

“I think there is a large opportunity.”

By 2021, the council wants to shift 40 percent of its program investments into basic markets and reduce its spending on China and other growth markets to 50 percent from 65 percent today.

The council will be travelling to many of the priority markets in the near future to talk to customers about their concerns and pitch the advantages of U.S. soybeans, such as sustainability.

Burke said the council is fully aware of the grower hardships associated with losing their top market and the urgency of moving the soybeans piling up on their farms.

That is why it “stopped on a dime” and moved the trade exchange it usually holds with buyers from Europe, the Middle East and North Africa to November 2018 instead of March 2019.

A lot of U.S. soybeans have been heading to the European Union in 2018-19. Sutter estimates the U.S. has a 75 percent market share in the EU this year compared to the usual 35 percent.

The council is also experiencing success in Egypt because of its growing poultry and aquaculture sectors and in Pakistan and Bangladesh, which used to be supplied by India before it started consuming all of its own soybeans.

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