China Might Need The U.S. This Time

China Might Need The U.S. This Time image

China Might Need The U.S. This Time

08/06/2019 | Author: Ken Smithmier

It was reported on Monday evening from the Chinese Ministry of Commerce that Chinese companies have stopped purchasing U.S. agricultural products in response to President Trump announcing that he intends to place a 10 percent tariff on an additional $300 billion of goods starting on September 1st.  The Ministry of Commerce also said they would “not rule out” tariffs on newly purchased agricultural goods after August 3. ClipperData sees about 1.2 million tonnes of US soybeans on the water destined for China at the moment. The prevailing question now becomes is it even possible for China to get to Brazilian new-crop soybeans in February 2020 without the US this year?

From August 2018 through January, China imported 42.56 million tonnes of soybeans. Marketing year-to-date soybean shipments from Brazil have totaled about 50mn tonnes through the first five days of August, which leaves 19mn tonnes of export capacity before reaching the USDA Foreign Ag Services forecast of 69 mn tonnes by January 2020.  This would imply that if Brazil shipped the balance of their exportable surplus to China this year, there would be an import deficit of 23.56 mn tonnes through January 2020. There are 4mn tonnes of open sales from the US to China that can be pulled from and maybe 4mn to 5mn tonnes from Ukraine, Argentina and Uruguay combined. Canadian canola or soybean supplies seem unlikely given existing trade issues with China. Collectively, China could be left short 14.50mn tonnes. Demand will need to ratchet back significantly or it appears buyers are in a position to continue sourcing US soybeans through the end of the year.

African Swine Fever is still an issue in the country and we expect this to remain in the 2019-20 season. However, we feel the 42.56mn tonnes of soybeans sourced between August 2018 and January 2019 reflects this already. Imports from October 2018 through January 2019 were already down 24% from the same period in 2017-18.

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About The Author

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Ken Smithmier is our Director of Market Research – Agricultural Markets. He brings to ClipperData 12 years of experience in the agricultural commodity markets, including prior roles at Archer Daniels Midland, Chicago-based The Hightower Report, and at a $2.5 billion global food services company, where he oversaw commodity risk. Ken has extensive experience in both physical and financial agricultural commodity trading. His primary responsibilities are analyzing global trends in the agricultural markets and delivering high level research to clients in the space.