Preparing for the Worst

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Over the course of the 35-day US government shutdown, it was rumored that Chinese importers would buy the following:

  • 5 million tonnes of US soybeans
  • 3 million tonnes of US corn
  • Unknown volume of US ethanol
  • 7 million tonnes of US wheat

A CNBC article almost two weeks ago titled “China’s soybean imports show American farmers have more to fear than the trade war” highlighted many of the concerns that we are seeing in our proprietary loading and offtake data from around the world. Here at ClipperData, we have unique access to information that allows us to track global flows of the aforementioned commodities, by vessel, despite the shutdown. Simply stated, the hard data has not verified the rumors at this point in time.

The most worrisome trade flow pattern we are tracking at the moment is Chinese soybean offtake. Vessel unloads up to this point in the 2018-19 marketing year should serve as a stern warning to market participants that official government import data for China should be revised lower in the months ahead and perhaps by a severe amount. Soybean offtake from October 2018 through today has totaled only 20.36 million tonnes.

China soybean imports ClipperData

Assuming Chinese offtake from February through September is the same as the 2017-18 marketing year, which was roughly 62.50 million tonnes, total 2018-19 marketing year offtake will only reach 82.90 million tonnes. This is down from the current United States Department of Agriculture estimate of 90 million tonnes.

The Trump-Xi Jinping truce was declared December 1st at the G20 Summit and the 90-day window for trade negotiations will expire at the end of February. Transit times for vessels leaving the US Pacific Northwest for China is roughly 17 days and an estimated 40 days from the US Gulf of Mexico. Because of this, it seems likely to us that any additional Chinese interest in US agri-commodities will stop by the end of January as Chinese buyers will not take on additional risk given President Trump’s threat to elevate tariff rates on existing goods if talks fall apart.

global oilseed exports clipperdataThe US-China trade war and the government shutdown escalated the uncertainty within the global agricultural trade. The US Department of Agriculture is a critical source of information for the market in many respects, although there are clearly other proven alternatives when attempting to assess global trade risk.

Despite political rhetoric from the Trump administration, our data continue to show that declarations of triumph are just rumors at this point and that there is a legitimate risk that global soybean demand forecasts by the largest importer in the world could be grossly overstated. The three-week opening of the government is welcomed and we look forward to the World Agricultural Outlook Board Supply and Demand estimates on February 8th  to hopefully clear the air.