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China tariffs on U.S. soybeans take bite out of sales projections

Article cover photo
Jeff Frank, an ISA director from Auburn, is hopeful that prices rebound in the near term before he has to market the rest of his 2018 crop. Today’s U.S. Department of Agriculture report confirmed fears that China’s tariff on soybeans will reduce exports and prices. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Matthew Wilde, ISA senior writer

   

The U.S. Department of Agriculture confirmed today what Iowa Soybean Association (ISA) leaders and grain analysts predicted for months: China’s 25-percent tariff on U.S. soybeans will reduce exports and prices.

U.S. soybean exports are forecast at 2.04 billion bushels during the 2018-19 marketing year, down 250 million bushels from last month, according to the July World Agricultural Supply and Demand Estimates Report. The drop reflects the added tax on U.S. soybeans by China, which now stands at 28 percent, effective July 6.

Soybean prices have plummeted more than $2 per bushel since the U.S.-China trade war heated up in late winter. Now that tariff threats became reality, the government lowered the 2018-19 U.S. season-average soybean price 75 cents at the midpoint. The forecast is $8 to $10.50 per bushel.

“The report confirmed concerns farmers and industry stakeholders have had for some time — the negative impact of the trade dispute is real and happening now,” said ISA CEO Kirk Leeds. “Larger soybean carryover stocks directly reflect reduced exports. If there isn’t a favorable resolution soon, especially with another record crop expected nationwide, the negative effect will be even more dramatic in 2019.”

U.S. soybean production is projected at 4.31 billion bushels, up 30 million on increased harvested acres, the report said. The national yield forecast held steady at 48.5 bushels per acre. Soybean ending stocks for 2018-19 are estimated at 580 million bushels, up 195 million from last month.

While not a rosy report, it wasn’t all doom-and-gloom. Beginning soybean stocks for the 2018-19 marketing year were reduced 40 million bushels to 465 million due to increased exports and crush this marketing year, which ends Aug. 31, data shows. The U.S. soybean crush for 2018-19 was raised 45 million bushels to 2.045 billion reflecting an increase in projected soybean meal domestic disappearance and meal exports. Drought reduced Argentina’s soybean crop by more than 661 million bushels, the report said. The country is world’s top soybean meal exporter.

“One has to wonder how bad things could be if Argentina had a normal crop,” Leeds said.

Despite losing market share to China, the report said lower prices for U.S. soybeans have increased exports to other countries. Egypt is a prime example, as the nation has tripled purchases of U.S. soybeans this year to nearly 63 million bushels as of mid-June.

Sue Martin, CEO of Ag & Investments Services of Webster City, said the soybean market already built in negative effects of the tariff and “handled the report quite well.” In fact, after an initial downturn, September beans on the Chicago Board of Trade closed 1-cent higher today at $8.39 per bushel.

To regain months of losses and hit the top end of USDA’s price projection, Martin said trade issues with China need to be resolved. Weather scares in either the U.S. or Brazil limiting production would do it, too.

“Both would make the market run,” Martin said. “If tariffs end, prices would skyrocket like no other given domestic and Chinese demand.”

ISA District 4 director Jeff Frank of Auburn is in wait-and-see mode. With a good soybean crop growing and adequate storage, he plans to see if prices rise before marketing more soybeans. Frank said he already sold 75 percent of expected bushels at a profit before the downturn.

"The crop isn’t made by any means, but we’re in good shape,” Frank said. “Demand doesn’t quit. People still need to eat. I’ll sit on the sidelines and see how things play out.”

Contact Matt Wilde at mwilde@iasoybeans.com.

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

For permission to republish articles or to request high-res photos contact Aaron Putze at aputze@iasoybeans.com. Iowa Soybean Association | 1255 SW Prairie Trail Pkwy | Ankeny | IA | 50023 | US

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