As the American farmer is enduring a grueling, slow harvest, many questions remain regarding the true size of the crop. Some feel the final U.S. yield will be closer to 45 bushels per acre, versus the current U.S. Department of Agriculture number of 46.9 bushels per acre.
Export demand for soybeans has actually picked up in recent weeks. Primary exports from the United States have been headed to southeast Asia. In addition, China imported in 1.73 million tonnes of soybeans from the U.S. in September alone. This total was up from a mere 132,248 tonnes last year in September. In August of this year, China imported 1.68 million tonnes American soybeans. However, by comparison, China imported 4.79 million tonnes of soybeans from its top supplier Brazil in September, which was down from 7.59 million last year. What catches my eye overall is that China is buying American soybeans again.
To me this is significant for three reasons. First, I can’t help but wonder if China is aware of our potentially much smaller U.S. crop that is struggling to be harvested. Therefore, it is likely that they are buying now, before prices potentially rally due to smaller than anticipated supplies. Second, this signifies positive traction in the trade war. Last year China dug their heels in and held off purchases of American commodities for as long as possible, instead buying from Brazil. Third, I feel China buying from the U.S. is a clear message to Brazil that they (China) will not solely be reliant upon Brazilian product going into the future.
In reality, currently there are three primary soybean growing countries that produce nearly three quarters of the world’s soybeans; the U.S., Brazil and Argentina. Most recent USDA estimates suggest that Argentina produces approximately 53 million metric tonnes of soybeans. Brazil by comparison grows nearly 125 million metric tons of soybeans annually. Of what Argentina grows, approximately 15% is used for exporting. Of what Brazil produces for soybeans, nearly 60% of its crop is exported. Of what the U.S. grows, we export approximately half of our soybean production.
Now, there is a new wrinkle in the global soybean story, this time stemming from Argentina. Argentina has a new president-elect, Alberto Fernandez. In Argentina, agriculture is highly important as it is the primary export and income generator for the nation. Years ago under a different president, Argentine farmer’s endured high taxes on overseas sales and export caps. Some feel this new president-elect may go back to those aggressive taxes as a means to generate income to meet various financial commitments. The reason this is significant is because, according to a recent article from Reuters, “Any tax increase would be paid to the government by export companies. But it would be farmers who in effect pay the tax because the companies discount export taxes from the prices they pay to growers. So higher taxes would lower local crop prices, hitting farmers’ incentives to plant and produce grains.”
Think about it. Potentially less grain production coming out of Argentina? If true, that shifts more demand to the U.S. That would also mean less global soybean production overall, which would continue to bring the global carryout/ending stocks number down as well. This would continue to provide support to soybean prices. The soybean story continues to twist and turn. I’ll keep you posted along the way.
Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at email@example.com.