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Some U.S. soybeans finding new markets after losing China share


By JORDAN STRICKLER

WASHINGTON, D.C. — Soybeans have been one of the hardest-hit U.S. commodities in the ongoing trade war with China. The market loss in that country is now looking like an outright import ban instead of just a crop with a higher tariff.

A recent 3 million-ton soy purchase by China came as senior U.S. officials traveled to Shanghai this week for the first high-level face-to-face negotiations since talks broke down in May. President Trump had protested that China hadn't increased its purchases of American farm products, an assurance he said was secured at a meeting with Chinese President Xi Jinping at the Group of 20 summit in Osaka last month.

China, the world’s top soybean buyer, has purchased approximately 14 million tons of American soybeans since December 2018, when Washington and Beijing first reached a truce in the trade spat. That number is down from the usual 30 million-35 million tons China usually buys annually.

In the face of declining sales to China, U.S. farmers have had to turn elsewhere to sell their crop. A majority of sales have remained in Asia, but are moving further east as countries such as Vietnam, Japan, Thailand, Indonesia, and Korea are gobbling up some of the excess.

Globally, Europe is the second-fastest growth poultry and pork industry by volume over the last five years; however, governmental regulations are dampening exports to there.

“Due to GMO (genetically modified organisms) regulations, Europe has ended up being somewhat of a closed market; however, Vietnam has a growing economy and population and have started to pick up more as the demand for chicken and pork pick up," said Marshall Martin, senior associate director of agricultural research, director of the Purdue University Soybean Center, and a professor of agricultural economics.

There are differing opinions on that. “The EU (European Union) has been an important market this year, and our market share in that market has roughly doubled from two years ago to the last year,” said Jim Sutter, CEO of the U.S. Soybean Export Council.

South America has also started to acquire some of the soy China has left on the table. "Colombia and South America is one place where business has started to pick up," said Martin. "We had a free-trade arrangement signed several years ago, which has opened up a lot of exports of ag products.

“Colombia, especially, has a growing affluent population with a desire to enhance the diets in that country. Plus, with the free-trade agreement, we do not have all the barriers and restrictions that we have with China."

He credits that country's location as a benefit, as well. "It's a relatively close partner as far as transportation. From New Orleans to Colombia isn't that far. It’s right across the Gulf of Mexico.

“In fact, I think there are also talks between the Indiana Soybean Alliance and the Colombian government, which would have some identity preservation and allow soybeans and, to some extent, corn to be sold by certain farmers, counties, or regions. This is something that they might even pay a premium for."

Mexico has shown some interest in picking up some of the surplus if the pending trade agreement among that country, the U.S., and Canada is finalized.

"It is really important that that trade agreement be approved by Congress," said Martin. "We do not want to have any declines in their market. They are an important export market for lots of agricultural products, including beans and pork products. They don't grow soybeans in Mexico; they need soybeans in Mexico for feed. That is certainly not a market we can lose."

“We are also doing work in a category of markets we call emerging markets,” Sutter said, adding that some African and Middle Eastern countries are new areas of potential, including Pakistan, India, Egypt, and Nigeria. “These would be places where per capita protein consumption is generally low, populations are generally large, and economics are improving.

“The idea is that these places are going to start increasing their demand for meat or other protein sources rapidly, and U.S. soy can help that demand as an important feed ingredient, a source for cooking oil, and a raw material for other protein products. It should be noted that these markets are all at a slightly different place on the development continuum.”

However, the loss of China as a market could take a while to rekindle when agreements are finally put back in place.

"Once you lose your trust in a supplier, you begin to look for ways to avoid that," explained Martin. "In the short term, these other markets will not be enough to cover what we lost in China, because the tonnage we were shipping there was so large.

“China is going to need to feed their population, and I believe that once those trade routes change to Brazil and Argentina, it will be a challenge for us to recover."

7/31/2019