By MICHELE F. MIHALJEVICH
MCHENRY, Ill. — The trade dispute between the United States and China should impact U.S. soybeans more than corn and wheat, according to an analyst with Allendale, Inc.
“China is about 61 percent of our soybean export market and exports make up about 51 percent of production,” noted Rich Nelson, Allendale’s chief strategist, last week. “We have about 31 percent of U.S. soybeans at risk right now with this whole China trade. We’re going to have some problems with, number one, a discount in pricing, as well as a moderate decline in potential exports.”
The U.S. and China have imposed or threatened tariffs on a wide variety of items imported from each other. China has a 25 percent tax on U.S. corn, soybeans and wheat. Canada and Mexico have also imposed or threatened tariffs on U.S. goods, including agricultural products.
Nelson said he’s less concerned about U.S. corn and wheat exports. The United States sells about 4 percent of its corn to North American Free Trade Agreement countries and about 2 percent of wheat.
“So, in the big picture corn and wheat are relatively safe right now, and our main threat will be a discussion on the soybean side,” he explained.
Nelson, along with Allendale president Steve Georgy, participated in the company’s July 24-26 Summer Outlook Series. Worldwide demand for soybeans is strong, Nelson said. Over the past five years, average annual growth in soybean usage has been 5 percent.
Brazil is expected to sell more soybeans to China, he pointed out. In the completed 2016 marketing year, 76 percent of Brazil’s crop went to China.
“Brazil is mainly a China supplier,” Nelson said. “They’re going to stay with China; increase their percentage shipped out to China, but drop in their exports to other countries.
“We’re assuming while the U.S. is going to see a slight decline in exports for the new crop year, much of this will be mitigated by the fact that we’ll be shipping out to a lot of (Brazil’s) traditional customers.”
Allendale has predicted a 2018 U.S. soybean crop of 4.5 billion bushels, up from last year’s nearly 4.4 billion. Ending stocks could be 502 milion-667 million bushels, depending in large part on exports, Nelson said.
As of July 12, new-crop bookings for U.S. soybeans totaled 326 million bushels, the best in four years, he added.
The current low price for soybeans – about $8.25 a bushel at the time of the conference – should be the low for November soybeans, Nelson said. Allendale expects prices in the $9.50 range by November.
As for corn, the USDA recently raised old-crop export goals to 2.4 billion bushels, up 100 million from previous expectations, Georgy noted. Current sales are roughly 96 percent of the new goal.
“So we’re sitting at 2.312 billion,” he explained. “There’s only eight weeks left in this marketing year, so we need to make up for that difference. That means that over the next eight weeks, we need to see exports continue now in order to meet what USDA just gave us on the last report as far as old-crop demand.
“Is this something that can be met? Yes, but it’s also pretty aggressive.”
USDA raised new-crop export goals by 125 million bushels, to 2.25 billion. Allendale expects prices for December corn to rebound from about $3.50 in July to $4.10-$4.15 in September, before falling to about $3.75 in November. They’re expected to rise to above $4 in December.
Wheat producers need stronger demand and increased exports to help boost prices, Georgy noted. For December wheat, Allendale anticipates a jump from July prices of under $5 to about $5.60 in October. They may drop to near $4.50 by December.
Drew Lerner, president of World Weather, Inc., expects an El Nino weather event to develop in the third or fourth quarter of the year. “By October, we’re going to have a moderately strong El Nino underway,” he said.
“When we get into December and go through the winter months, we start picking up the traditional El Nino influence, which is for Canada and the northern U.S. to be warmer than normal while the southern U.S. has a cooler bias. El Nino is probably likely to stay with us into the growing season, so, if that’s the case, we tend to do fairly well in the United States with an El Nino environment.”
Lerner also spoke during the Allendale event.