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Veteran Advisor

What's up with soybean exports to China?

At 9am:

Folks, Mike Steenhoek, Executive Director Soy Transportation Coalition, sent out a message today about the current situation of U.S. soybean exports to China. It's very informative. I hope that you find this helpful.

 

In his own words:

"Since I have increasingly received calls regarding the impact of the coronavirus on soybean exports and supply chains, I thought I would send a note highlighting what we know and what we do not know.  As we all are aware, we still do not have a full understanding of the ultimate extent of the virus outbreak.  In the midst of this uncertainty, the following variety of statistics and comments may be of interest. 

 

First of all, it has not been a surprise to many of us to witness the recent low volume of U.S. soybean exports to China.  For example, for the week ending March 5th, the U.S. Department of Agriculture reported 139,721 metric tons (5.1 million bushels) of soybean exports to China.  That is the equivalent of 2-3 ocean vessels.  While both the U.S. and Chinese governments have recently expressed confidence that China will ultimately fulfill the purchase targets contained in the phase 1 deal, there are a number of widely acknowledged headwinds preventing robust U.S. soybean export sales to China:

  • This is the time of the year in which the U.S. soybean export spigot normally gets turned off and the Brazilian soybean export spigot gets turned on.  Eighty percent of U.S. soybean exports occur between the months of September and February.  As many are aware, since Brazil is a southern hemisphere country, their harvest occurs during our spring months and their planting coincides with our harvest season.  The Brazilian soybean harvest currently underway continues to portend significant volumes of production.  Brazil is normally the dominant global supplier of soybean exports this time of the year.  The U.S. typically becomes the dominant supplier later in the year as our harvest comes online.
  • The persistence of African Swine Fever in China continues to depress demand for soybeans compared to recent volumes. 
  • The significant strengthening of the U.S. dollar compared to the Brazilian real continues to result in U.S. soybean exports being more expensive compared to Brazilian soybeans.  Currently $1.00 is trading at 4.64 Brazilian reais.  In 2017, $1.00 traded at between 3 – 3.5 Brazilian reais.  In 2013, $1.00 traded at approximately 2 reais.  The U.S. dollar has strengthened 11% against the Brazilian real since January 1, 2020, alone.     

 

Brazilian soybean exports to China have been occurring

 

According to the Brazilian Ministry of Agriculture, 236,000 metric tons of Brazilian soybeans on average were exported to China daily during the first three weeks of February.  Despite the spread of the coronavirus in China, Brazilian soybean exports did continue.  During the same period in 2019, daily soybean exports from Brazil to China were 263,400 metric tons on average.

 

Weekly U.S. soybean and grain exports

 

The U.S. Department of Agriculture reported the following export sales for U.S. soybeans, corn, and wheat:

 

Week ending March 5th, 2020

  • Soybeans: 572,416 metric tons
  • Corn: 829,865 metric tons
  • Wheat: 415,548 metric tons

 

Week ending March 7th, 2019

  • Soybeans: 672,174 metric tons
  • Corn: 793,570 metric tons
  • Wheat: 615,715 metric tons

 

Weekly soybean and wheat exports for the most recent week declined compared to the same week in 2019.  Corn exports, in contrast, increased. 

 

(NOTE: One metric ton = 36.74 bushels of soybeans or wheat; One metric ton = 39.37 bushels of corn)

 

U.S. soybean and grain exports year to date (Source: U.S. Department of Agriculture)

 

                              2020                                                   2019

Soybeans             30,130,673 metric tons                 26,858,270 metric tons

Corn                     14,947,795 metric tons                 26,611,680 metric tons

Wheat                  19,228,487 metric tons                 17,625,944 metric tons

 

As you can see, soybean and wheat exports are up thus far in 2020 compareed to the same period in 2019.  Corn exports are lower. 

 

(NOTE: The marketing year for soybeans and corn is September 1st thru August 31st; The marketing year for wheat is June 1st thru Mary 31st.)

 

Containerized shipping has experienced declines

 

With the normal slowdown in manufacturing and shipping in China due to the Lunar New Year and the subsequent outbreak of the coronavirus, there have been a considerable number of blank sailings between China and the U.S.  This has resulted in empty containers rapidly accumulating and U.S. ports due to a decline in return journeys to China.  This has been a growing concern for ports, exporters, and importers.  Logistics internally in China have been significantly curtailed as well.  While a variety of sources continue to highlight how manufacturing and supply chains in China are recovering, returning to a state of normal will take some time.  Eight percent of U.S. grain exports occur via container so this disruption has certainly impacted those companies in particular. 

 

What say you?

 

Mike

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3 Replies
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Senior Advisor

Re: What's up with soybean exports to China?

Isolationism   new  shorthand  -  Covid  - - -  

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Honored Advisor

Re: What's up with soybean exports to China?

It’s time to put the hammer down on China. Virus or no virus. 

No ship from China gets unloaded here until one of ours gets unloaded there. Of course the values have to match up...period.

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Senior Advisor

Re: At 236 thousand tons per day, it doesn't take genius to figure out...

At 236 thousand tons per day, that's 1.6 million tons per week and the majority of those are going straight to China, this is just business as usual between Brazil and China.  If the Americans complain, they can just point at the cheap price and shrug their shoulders and say, "go read Phase One", it's right there market conditions".

  As far as agricultural purchases are concerned, Phase One isn't worth the paper it's written on.