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New Buyers Elusive, U.S. Builds a Mountain of Soybeans
U.S. farmers will reap a record-large soybean crop in the middle of a trade war with China, ordinarily the No. 1 export customer for the most widely grown U.S. crop, with no replacement buyer on the horizon. As a result, said the USDA, farmers can expect the lowest season-average price for soybeans in 12 years and the largest soybean stockpile ever, which likely will hold down prices in the future.
China will import fewer soybeans during the tit-for-tat tariff war, and U.S. exports will stagnate, rather than accelerate 11% as earlier forecast, during the trade year that opens September 1, said USDA in its monthly WASDE Report. There were hopes that buyers — the European Union was mentioned prominently in late July — would tap the U.S. as a back-up supplier because Brazilian soybeans are in demand in China, but it has not been enough to expand the U.S. export flow.
“Lower U.S. soybean prices vis a vis Brazil, a result of China’s duties imposed on U.S.-origin soybeans, have contributed to a surge in EU imports from the U.S.,” said USDA analysts. “The recent shift to U.S. origin is likely to continue as long as crush margins remain attractive. However, it is important to note that the EU is a mature market with limited capacity to expand,” they said in the Oilseeds: World Markets and Trade Report. The EU buys one sixth as many soybeans as China, 15 million tonnes vs. 95 million tonnes.
In its first forecast of the fall harvest, the USDA pegged the soybean crop at 4.586 billion bushels, 4% larger than the record set last year. The crop would be worth $40.8 billion at USDA’s estimated average price of $8.90 a bushel. By comparison, the smaller 2017 crop was worth $41.1 billion because it sold for 45¢ a bushel more.
The soybean stockpile has multiplied from a modern-day low of 92 million bushels in fall 2014. Some 430 million bushels, a five-week supply, are expected to be in U.S. warehouses at the end of this month. The so-called carryover would stand at 785 million bushels, a nearly 10-week supply, when the 2019 crop is ready for harvest, the result of this year’s mammoth crop and stand-still consumption.
China’s vice minister of agriculture told the Xinhua news agency that Beijing could replace the U.S. with other suppliers, reported The Australian newspaper. “Many countries have the willingness, and they totally have the capacity to take over the market share the U.S. is enjoying in China,” said Vice Minister Han Jun. “If other countries become reliable supporters for China, it will be very difficult for the U.S. to regain the market.” Han said negotiation was the only way to resolve Sino-U.S. trade dispute.
The Trump administration has earmarked up to $12 billion in aid to farmers and ranches to offset the effect of tariffs on U.S. agriculture but has not described how it will divide the money.
“The principle seems simple: Pay people an amount tied to how much the new trade restrictions have reduced commodity prices. The problem is that this price effect is not something one can easily measure,” wrote Pat Westhoff, head of a University of Missouri think tank, in the Columbia Daily Tribune. “Disentangling how much of an observed change in farm product prices is due to a trade restriction, and how much might be due to changes in the weather or the general economy is very difficult.”