China Still Buying US Soybeans Despite Reports of Official Request to Stop | Blog
Teucrium | June 5, 2020
State-owned Chinese firms are still buying US soybeans despite June 1st reports that the Chinese government had asked the companies to stop buying from the US. In the four days following that report the US sold 1.026 million metric tons to China according to Dan Cekander at DC Analysis referencing USDA daily export sales announcements.
We believe the Chinese are likely to continue to buy US soybeans despite the Chinese Government’s request for two reasons:
1. China needs more soybeans than non-US exporting countries can provide
2. US soybeans are the competitively priced for shipment to China
The USDA projects China’s soybean import demand for the 2020/2021 crop year at a record 96 million metric tons. That is more than 4% higher versus last year. Year to date the volume and rate of Chinese soybean imports is helping to validate the forecast.
Concerning prices, the US Dollar is currently weakening versus the Brazilian REAL. This is helping make US soybeans more appealing to Chinese buyers. As of this writing US soybeans are among the most affordable for shipping to China. The Chinese could choose to source their beans elsewhere out of “spite,” but doing so could be a costly move to make.
Furthermore, the US, Brazil, and Argentina account for approximately 90% of all global soybean exports. (for reference see our WASDE Summary Tables here). If Chinese soybean import estimates even come remotely close to being realized, US soybeans will find their way into China. Simply put, there is nowhere else for China to turn to meet their import needs.
Perhaps this is partly why US Trade Representative Robert Lighthizer stated on June 4th that he feels “…very good” about Chinese trade. As it relates to soybeans we certainly agree. We believe Chinese buying of soybeans, including those from the US, will continue.