China's hogs need U.S. beans
When it comes to soybeans, Jerry Gidel is a bull in China's shop of food imports.
China's huge soybean market accounts for two of the three reasons the analyst thinks export demand for U.S. soybeans will remain strong in the marketing year that started in September.
“I'm saying right now to any producer, I have no desire to sell 2012 new crop soybeans,” says Gidel of North American Risk Management Services, Inc. in Chicago.
1. China's swine herd, nearly five times the size of the U.S. hog population, will hit a record in 2012. Gidel expects 479 million head, up about 3.5% from 2011. Pork is China's most popular meat.
2. Last summer, China abandoned price controls on oilseed crushers. The inflation-fighting cap started a year ago was hurting domestic soybean crushers in China. Because their margins are improving, so will demand for imports from the U.S. and South America.
3. Brazil harvested a record soybean crop last spring, but even so, Gidel was expecting South American exports to taper off this fall, just in time for some newly harvested U.S. soybeans to start flowing to our largest customer. Gidel thinks Brazil's 2012 crop could be smaller than USDA projections.
All this is happening just when total U.S. soybean exports are expected to be down from the 2010-11 marketing year.
USDA's forecast for soybean exports for the 2011-12 marketing year is 1.375 billion bushels, down some from 1.5 billion in the year that ended in August.
Still, it would be our third biggest year for exporting soybeans. Gidel attributes much of that to China, which buys roughly half of U.S. bean exports.
With U.S. planted acres and yields of soybeans down from last year, Gidel isn't surprised by the likelihood of smaller exports of soybeans.
“What I'm sensing as we go through time, we're going to be somewhat restricted on our exports,” he says. “But are our exports going to completely collapse? No.”
Grant Kimberly, an Iowa farmer and director of market development for the Iowa Soybean Association, agrees with Gidel that the growth of livestock production, including swine and aquaculture, bodes well for U.S. soybean exports to China.
Kimberly had a chance to visit China in late March on a trade mission organized by the Iowa farm group. There, he heard a Chinese official with a private soybean crushing firm offer an astounding forecast for soybean imports by the 2014-15 marketing year.
Renault Quach, vice general manager of Dongling Grain and Oil Co., Ltd. in Guangzhou told the Iowans he expects China to import 68 million metric tons (mmt) of soybeans by 2014-15. That's a leap from the 52 mmt in exports to China that USDA expects this year and the 56.5 mmt for 2011-12.
“It's hard to believe,” Kimberly says, “but at the same time, we've met with the guy the last three years or so, and he seems to be hitting it on the head.”