Brazilian exports of soybeans to China are surging. And while the threat of a 25 percent tariff on U.S. soybean imports isn’t helping the cause, product quality and burdensome inventories in Brazil are compounding the problem for U.S. soybean producers, according to Michigan Farm Bureau Field Crop Specialist Kate Thiel.
She said a recent American Farm Bureau Federation (AFBF) report of a record Brazilian crop of 4.19 billion bushels in 2016/17 pushed soybean ending stocks to a record-high of approximately 940 million bushels there.
Brazilian soybean farmers are expected to top that record again in the 2017/18 marketing year, with another record crop of 4.23 billion bushels.
“Given two back-to-back record harvests, and record-large inventory levels, the increase in Brazilian soybean exports is no surprise,” Thiel said. “For the 2017/18 marketing year, Brazilian soybean exports are projected at a record-high 2.7 billion bushels, marking the eighth consecutive year of record soybean exports.”
Meanwhile, following back-to-back record soybean crops in the U.S., and partially due to the lower protein content of U.S. soybeans, exports are projected to fall 5 percent in 2017/18 to 2.1 billion bushels, according to the AFBF report.
According to Thiel, 30 percent of U.S. soybeans — about $14 billion worth per year — are normally exported to China, making soybeans the United States’ top ag export to China.
With reduced export volumes, U.S. soybean ending stocks are projected at 550 million bushels – the second-highest on record behind 574 million bushels in 2006/07. The slowdown in U.S. exports, combined with record crops in Brazil and a production shortfall in Argentina created an opportunity for Brazil to expand its footprint in China.
Thiel said with projections of Chinese soybean imports in 2017/18 hitting a record-high 3.56 billion bushels, up 4 percent from the prior year, the tariff threat couldn’t come at a worse time for U.S. soybean farmers. AFBF estimates that a U.S. farmer harvesting 1,000 acres of soybeans could see his income drop as much as $23,300 due to new Chinese tariffs.
Through March of the 2017/18 marketing year, Brazilian soybean exports have totaled 741 million bushels, up 126 percent over prior marketing-year levels, and up 130 percent over the 5-year average.
“Meanwhile, U.S. exports to China through March totaled 932 million bushels of soybeans, down 23 percent from prior-year levels” Thiel said. “That’s an even bigger concern when you understand that Brazilian exports to China generally peak in the late spring and continue through October, while U.S. exports to China peak in the winter months immediately following harvest.”
While the future looks bleak for direct U.S. soybean exports to China, Thiel acknowledged that agricultural trade is a global market, and that new markets will evolve to meet global demand. Ironically, she predicted that some of those new markets will include, of all places, South America.