With a 4-million-ton cut in China’s soybean import forecast this month, projected imports combined for both 2017/18 and 2018/19 have fallen 16 million tons since the start of trade tensions and retaliatory tariffs. This includes 3 million tons for 2017/18 and 13 million tons for 2018/19. Imports for 2018/19 are now forecast at 90 million tons.
A portion of this decline is offset by the higher use of domestic supplies. However, most of the decline is in response to lower protein feeding for livestock. While growth in China’s SME (soybean meal equivalent) demand remains positive, the rate of increase has declined. A recent announcement by a feed association advising industry to lower inclusion of protein in feed rations could reduce demand for imported soybeans.
Since the beginning of the current trade tensions, purchases of U.S. soybeans by China have evaporated, with many previously booked sales being canceled. The few quantities that were shipped after the imposition of duties have either been diverted to other markets (Vietnam, Singapore, and South Korea) or are currently languishing off the coast of China, waiting to be discharged.
With Chinese buyers showing little interest in U.S. soybeans, this month’s reduction in the forecast in China’s imports is reflected in a similar reduction in the U.S. export forecast.
Though China is shunning U.S. beans and the 2018/19 U.S. soybean export forecast has also declined since USDA’s initial forecast in May, the total reduction (about 9 million tons combined across both 2017/18 and 2018/19) is only about half the decline in China’s imports given the stronger demand for U.S. soybeans in other markets.
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Factoring in the larger U.S. soybean crush, in response to higher margins and demand for meal, results in even less impact of lower China demand on U.S. soybean disappearance. While overall lower U.S. soybean disappearance, resulting from reduced exports, ultimately ends up in stocks (and pressures prices), this year’s larger production — up nearly 9 million tons from the initial forecast in May — represents the largest share of forecast stock building in 2018/19.