Global Markets: Soybeans – Continued U.S.-China Tension Affecting Trade

As of the October 4 U.S. Exports Sales, U.S. soybean outstanding sales are below last year owing to fewer sales to China, which are currently 85 percent below last season. Anemic weekly sales and significantly lower outstanding sales indicate that there is not much interest in purchasing U.S. soybeans by China, primarily due to its decision to include soybeans on the list of key U.S. commodities that are subject to retaliatory tariffs.

U.S. soybean exports to China typically reach their lowest levels in summer and then build strength as harvest progresses. However, a large pullback in Chinese demand for U.S. soybeans appears likely to continue well into 2018/19.

U.S. accumulated soybean exports were a little over 3.0 million tons or 23 percent below last year. Accumulated exports to China were only 67,000 tons, which is 2.5 million tons less compared to last year. Weekly shipments to the rest of the world were 1.6 million tons above last year; however, they did not fully offset reductions for China.

U.S. soybean sales to the rest of the world (including unknown) are 42 percent above last year, though the ability for the rest of the world to make up for typical exports to China will be tested.

The export sales are a good forward indicator of shipments; however, unlike China, many markets such as the European Union, the Middle East, and North Africa do not purchase soybeans in advance, so the report’s usefulness as a predictor of future shipments is limited.

2017/18 U.S. Soybean Share in China Falls

Based on available trade data, USDA estimates that 2017/18 U.S. soybean market share in China has fallen to 29 percent from 39 percent last year, while Brazil surged to 66 percent from 48 percent. According to U.S. Census Bureau trade data, U.S. soybean exports to China (Sep-Aug) were the lowest in volume since 2013/14 and the lowest in value since 2009/10.

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The United States and Brazil are the primary soybean suppliers to China. With each supplier having alternate growing and harvesting seasons, China’s imports have historically run in a cycle with high imports from the United States between September and February (Brazil’s growing season) and then high imports from Brazil between March and August (U.S. growing season).

During September-December 2017, the United States shipped 18 percent less soybeans to China than in 2016. With record supplies available on September 1, Brazil exports to China rose more than three-fold in the final four months of 2017, and this increase more than offset lost trade from the United States.

In the first months of 2018, with the start of the Brazilian soybean harvest, the prospects of an uptick in the pace of U.S. sales to China were limited. During January-February 2018, U.S. exports to China were 24 percent lower than over the same period in 2017.

In the meantime, Brazil continued its soybean shipments to China at nearly the same pace as the previous year. U.S. soybean exports to China between January and July did relatively well in volume terms; however, the Calendar Year pace was the lowest since 2013.

The implementation of retaliatory tariffs led to an adjustment of trade flows in global soybean markets. An export price gap that opened between the United States and Brazil continued to widen towards the end of the marketing year, leading to fewer Brazilian sales outside of China and greater U.S. exports to other-than-China markets.

Trade tensions between the United States and China will continue to affect soybean and soybean products trade in 2018/19.

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