China has been the key demand factor in U.S. soybean prices heading into the February WASDE report. The question people are asking is whether a China soybean ban for U.S. producers could hit the markets.
Let’s look at a major revelation about the impact of U.S-Chinese trade in this marketing year…
Trade problems between the U.S. and China have accelerated over the last few months. The U.S. is putting heavy tariffs on washing machines and solar panels. China is investigating whether U.S. subsidies on sorghum are hurting Chinese farmers.
But now China is looking at the impact of trade measures on soybean imports from the U.S. China has already turned more and more away from the U.S., choosing Brazil as its exporter of choice.
The reason has been tied to Brazil’s better protein quality.
But the ongoing trade feud between Brazil and the U.S. can become a larger deterrent.
At 97 MMT, China dwarfs the rest of the world’s soybean trade. So, it was concerning that the country didn’t invite the U.S. Soybean Export Council to discuss broader trends in the ag sector with other import and export groups.
According to the Council, China’s agricultural ministry is now “researching the implications on China and the Chinese crushing industry in the event U.S. soybeans have restricted market access.”
While “restricted market access” might not mean a total China soybean ban, it could lead to a dramatic downturn in exports to the world’s largest market.
Though the country hasn’t made any announcement, this is a significant development. The Obama administration hit China with tariffs on tires in 2009.
As a result, China responded with tariffs on chicken feet. Eventually, the US would win a dispute at the WTO, but there’s one serious problem.
Poultry exports fell as much as 90% after those tariffs.
A China soybean ban is something U.S. soybean producers cannot afford.
China Studying Impact of Trade Measures Against U.S. Soy, Sources Say
China is studying the potential impact of trade measures imposed on soybeans imported from the U.S., valued last year at $13.9 billion, according to people familiar with the matter.
The U.S. Soybean Export Council wasn’t invited to the meeting convened by the ministry with representatives from China’s importing and processing industries, Paul Burke, the Beijing-based North Asia regional director for the U.S. group, said in an email. The ministry “has been researching the implications on China and the Chinese crushing industry in the event U.S. soybeans have restricted market access,” Burke said. “No decisions were made or announced as to whether China will in fact restrict access.”
Soybeans on the Chicago Board of Trade were little changed at $9.8325 a bushel after declining 0.3 percent on Wednesday. Soymeal futures on the Dalian Commodity Exchange were little changed at 2,806 yuan ($444) a ton after climbing 1.5 percent on Wednesday, the biggest gain for the most-active contract since Dec. 6.
While China has already “handicapped” U.S. sorghum, soybeans would be “an order of magnitude larger,” Commonwealth Bank of Australia strategist Tobin Gorey said in an emailed report. Soybeans “are a major concern for a significant number of people who voted for the current U.S. President. Should U.S. soybeans become estranged from their largest customer then that will weigh on U.S. prices,” he said.
China’s soybean imports have climbed to a record as expansion in large-scale livestock farming and a shortage of protein-rich feed grains boost soy-meal consumption. While the U.S. counts China as its biggest soybean market, the Asian country last year bought more of the oilseed from Brazil.
Soybean imports totaled 8.48 million tons in January, according to customs data released Thursday. That’s 11 percent lower than December and up 11 percent from a year earlier.