Much of the trade war with China for agriculture has centered around soybeans. For more than a year, President Trump said China promised to buy large amounts of U.S. agricultural commodities, including soybeans. However, many of those promises seemed empty, with the president even taking to Twitter to address the issue.
With all the talk and a 25% tariff in place, is China buying U.S. soybeans or not? Ken Smithmier, head of Ag Research for ClipperData, has data that shows the U.S. is sending soybeans to China, and those buys could be on the rise.
“August is going to be a big month,” said Smithmier with ClipperData, which tracks agricultural shipments. “China has already unloaded just over 7 million tonnes this month.”
Those numbers are in addition to the latest government data that shows China bought 911,888 tonnes of soybeans in July, which is up from the 308,127 tonnes purchased the same time last year.
“The U.S. is shipping soybeans,” he said. “There are boats on the water. We just shipped some last week. There were nine boats, four out of the Gulf and five out of the Pacific Northwest (PNW). What we're not seeing is any big purchases from the U.S. by China.”
Smithmier said with a week left in the month, he’s watching more vessels currently en route, which means August could be in for bigger buys than July.
“As of this morning, there are 25 to 30 vessels in the Yellow Sea or South China Sea area, which would imply maybe another 1.5 to 2 million tonnes [are heading for China],” said Smithmier. “When you add that all up, assuming there's no delays with unloading due to weather, maintenance or things like that, I think it's fair to say for August could be looking like a 9- to 10-million-tonne month, which would be a big month for China.”
Smithmier said while China is purchasing some U.S. soybeans, the country is continuing to feed its hunger through Brazil. However, he said it’s key to watch where China buys soybeans the remainder of the year, as Brazil may be running low on its soybean supply until the new crop hits.
“Unless they have more of an exportable surplus than what the USDA or their local government knows about know, the math doesn't work,” he said. “If China's going to import a similar amount to what they did last year from September through January, essentially what it shows is there's anywhere from a 12 to 14 million tonne deficit, if China buys the same amount within that period,” he said.
Smithmier points out there are two arguments regarding why China would or wouldn’t fill that need. He said the first is China’s overall demand has more downside from issues like African Swine Fever. He said if that’s the case, it will be an issue not just for the U.S., but also Brazil. The other argument is the U.S. could start selling more soybeans to South America, which would then turn around and get shipped to China. Smithmier said that’s a possibility, but it has to make economic sense for buyers and shippers to go that route.
Bottom-line, Smithmier thinks China will need to come to the U.S. at some point.
“You probably have 2 million tonnes that can come from Canada, maybe a couple million tonnes come from Argentina, but even if you factor those in, there's still a hole to fill,” he said.
Smithmier said bigger buys could be in store once Brazil runs out of soybeans, but those may not hit until the fourth quarter of 2019.