China has fulfilled its commitment to buy 12 million metric tons of U.S. soybeans according to a report from Reuters. That commitment was part of an agreement set up last October to end the trade war between the Trump administration and China. However, one ag market expert says the news is much more of a warning than a celebration.
“When you look at 12 million metric tons—essentially half of what they were buying over the last couple of years, and a third of what they were buying more than a decade of go from the United States—they were in the direction of moving away from us. It’s something that I’ve been warning the industry about for the last seven or eight years,” says Arlan Suderman, Chief Commodities Economist with StoneX.
He tells Hoosier Ag Today that the competition that America’s soybean producers are facing from Brazil is only going to tougher and tougher in the years to come.
“We are not the low-cost producer in the world anymore,” he says. “Brazil can produce two crops—sometimes three on the same ground each year. They have a cheap currency that makes their products cheaper on the international market as well. Plus, China has been investing in Brazilian agriculture and infrastructure in order to work in this direction to try to grow their soybeans in Brazil.”
But Suderman adds there is a silver lining.
“On the positive side, it does help us bridge the gap as we shift toward more of a domestic demand scenario for soybeans—be it for livestock production and for biofuel production,” he says. “Rather than export bulk commodities, we need to be focused on value-added versus protein—which protein demand is soaring in the world, not just the United States, but throughout the world. Biofuel demand is growing globally as well.”
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