PortandTerminal.com, March 13, 2019
Who’s winning the US-China trade war? When it comes to soybeans, Brazil is. The South American nation is capitalizing on the instability caused by US President Donald Trump’s trade war to profit from both China and America in soybean trade.
China’s appetite for soybeans
As China has become wealthier its 1.4 billion people have started to eat more meat, especially pork and chicken. China crushes soybeans to create soymeal which it uses to feed its massive livestock herds that supply the meat.
China imports soybean at any cost for a very simple reason: the country doesn’t produce enough soybean on its own to meet its growing needs. And China needs a lot.
China consumes about 32% of the soybeans produced globally—and its demand is increasing by at least 5% each year. To meet its domestic demand, China has to import most of the world’s exported soybeans.
China looks to Brazilian soybeans
In July 2018 China placed a 25% tariff on American soybeans imports in retaliation for tariffs placed upon Chinese exports. Up until July, America had been China’s largest source of imported soybeans.
The tariffs forced Chinese soybean importers to look to other sources. As the second largest soybean producer in the world, Brazil was the obvious choice. Brazilian exports of soy to China soared by +80% thanks to the tit-for-tat trade war between the United States and China. Meanwhile, China’s 2018 soybean imports from the U.S. hit their lowest level since 2008.
Where do things go from here?
Many worry that the tariffs have sent Chinese soybean importers down a path that will mean trade between the two countries will never fully come back to the levels American exporters once enjoyed.
When you start becoming an unreliable supplier, people are going to start looking elsewhere
There is growing confidence within China’s soybean industry and government that the world’s largest pork-producing nation can wean itself off of U.S. soy exports – a prospect that would decimate U.S. farmers, up-end a 36-year-old trading relationship worth $12.7 billion last year, and radically remap global trade flows.
James Lee Adams – a retired farmer from Camilla, Georgia, and past president of the American Soybean Association – was among those who worked in the 1980s to open the Chinese market to U.S. soybeans.
He was quoted in a recent Reuters article saying “You develop trade partners over a long period, but you can lose them overnight”. “When you start becoming an unreliable supplier, people are going to start looking elsewhere.”
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