With worldwide recession fears climbing, there is further evidence that China’s economy is slowing down. China’s National Bureau of Statistics reported second quarter GDP was only up .4% from a year ago. That was less than expected and slowed sharply from the 4.8% growth in the first quarter.
It’s a result of China’s continued COVID lockdowns and was the slowest economic growth since the first quarter of 2020, which COVID first emerged. That’s been having a chilling effect on demand for agricultural products, including from the U.S.
Steve Freed, ADM Investor Services, says, “So when you look at China data today. From last year they’re edible oil imports are down 75%. Pork imports are down 39% and beans 8% So that’s not a healthy number because a lot of commodities rally when China is buying.”
In fact, soybean exports have slowed after the record year in 2021, even with a much smaller crop in Brazil. Some of it is tied to the COVID lockdowns in the country. Steve Censky, American Soybean Association CEO, says, “Our soybean exports to China have been running a little bit behind what they were last year part of that is just due to the demand. They’re not going to eat out at restaurants, they’re not going out and shopping as much and that has a negative impact on pork and poultry consumption and that means less soybean meal that’s needed.”
China has not bought U.S. soybeans since June 1. Plus, they’ve cancelled previous bean purchases in the last three weekly export reports. So, is that because they bought those beans at the highs and are now waiting for prices to come down to buy? Bryan Doherty, Total Farm Marketing says, “The other argument is they’re just pulling back on overall demand and don’t like the price. It’s not unusual through to see. We’ve seen this before you get into summer and you get cancellations.” He says it may also be because China’s COVID lockdowns are impacting logistics and slowing down the shipping of imports.
However, USDA has already figured this into the soybean balance sheets. Bill Biederman, AgMarket.net says, “They’ve reduced the export number to 2.170 billion bushels (bb) and the new crop ending stocks number all the way down to 235 million bushel, down from 2.261 bb that we sold last year. So the export number that USDA is accounting for is already assuming a 4% decline on the old crop and a further decline on the new crop.” And USDA also included a nearly 2 million metric ton drop in China soybean imports in the July WASDE.
The bigger question now is whether or not demand will continue to slow for U.S. soybeans and other ag products to China with the rising risk of stagflation in the world economy and amid tightening monetary policy overseas.
