Opportunity Looms for Canada's Soybeans in U.S.-China Spat

September 25, 2018 03:17 PM
 
The conflict between China, the world’s top soybean consumer, and the U.S., the biggest exporter behind Brazil, means traditional trading patterns have gone haywire. Could Canada benefit?

(Bloomberg) --

Canada, a relatively modest participant in the global soybean market, is poised to leap into the fray with a chance to boost exports to China, which has shunned shipments from the U.S. amid an escalating trade war.

“There’s a big opportunity for Canadians to fill some of that void that we’re seeing” in China, Joel Merkosky, co-president of Johnston’s Grain brokerage in Calgary, said in a telephone interview.

The conflict between China, the world’s top soybean consumer, and the U.S., the biggest exporter behind Brazil, means traditional trading patterns have gone haywire. Argentina, the leading shipper of soybean meal, took the unusual step of buying the oilseed from the U.S. to meet domestic demand while shipping its own crop to China. That shift may also occur in North America.

“You’re going to see more U.S. beans come into Canada, and more Canadian beans go to China,” Merkosky said.

Brokers such as Johnston’s Grain are looking at importing cheap U.S. soybeans into Canada for processing, and exporters may explore “arbitrage opportunities” for shipment overseas, Merkosky said. Prices for U.S. soybeans have plunged as demand from China declined and a bumper harvest looms.

In the past two decades, Canada became the fifth-largest soybean exporter as farmers expanded acreage. Overseas sales are a fraction of the 75 million metric tons from Brazil and 56 million tons from the U.S. forecast to be shipped during the 2018-2019 crop year, according to the U.S. Department of Agriculture.

The USDA this month lowered its forecast for Canada’s shipments during the 2018-2019 crop year to 5 million metric tons from an earlier estimate of 5.5 million as drought reduced the crop. Still, Canada has exported 156,000 tons of soybeans since Aug. 1, more than double the same period a year earlier, the latest Canadian Grain Commission data show. The data does not break down shipments by destination.

 

Copyright 2018, Bloomberg

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