While U.S. soybean sales to China suffered in 2018, they’re making some headway across the Atlantic Ocean. On the 50th anniversary of the soybean industry’s development efforts in the European Union, the United States has outpaced Brazil as the number one supplier to the continent.
The website U.S. Soy Dot Org says America is also the top soybean supplier to the Middle East and North Africa. Farmers and industry officials say the challenge is to make sure the growth that began as a result of the trade dispute with China keeps going in the right direction. Brazil soybeans are currently fetching a big premium. Government data says Brazil soybeans are getting $89 per metric ton more, on average, than U.S. oilseeds were last month, due to Chinese demand. A drought also dramatically cut production and meal output in Argentina, the world’s top exporter in 2017.
As a result, U.S. soybeans and meal exports are up 243 percent and 105 percent, respectively, to Europe and the Middle East/North Africa regions. Countries like Egypt, Spain, Saudi Arabia, and many others have either increased their soybean purchases or have become new customers.
U.S. soybean farmers welcomed news from President Trump Monday confirming a second payment under the United States Department of Agriculture (USDA)’s Market Facilitation Program.
“Soy growers are very thankful that President Trump understands the need for this payment on the full 2018 production and that the Administration will deliver the second half of the aid as promised. While it will not make our losses whole, it will certainly help offset the drop in prices we have experienced since China cut off U.S. soybean imports,” said American Soybean Association (ASA) president Davie Stephens, a soybean producer from Clinton, Kentucky. “We saw some initial sales of U.S. soybeans to China last week, which was also welcomed news and we hope a sign that the trade war could be turning a corner as a result of President Trump’s recent meeting with President Xi.”
The Administration announced the Market Facilitation Program (MFP) in July as part of a trade aid package to partially offset the short-term impact of foreign tariffs on U.S. agricultural exports, including a 25 percent duty imposed by China on soybean imports. Farmers who apply under the MFP by January 15 and who have been eligible to receive payments on half of their 2018 production will now receive a payment of $1.65 per bushel on their entire harvested crop.
ASA continues to advocate for a negotiated solution to the trade war that would result in China rescinding the 25 percent tariff and fully opening its market to commercial purchases of U.S. soybeans. Said Stephens, “The sooner the market opens and tariffs are rescinded, the sooner we can start to rebuild the exports we have lost this year.”
The mysterious orange maggots that drilled into soybean stems and killed plants in parts of Iowa, Nebraska, South Dakota and Minnesota last summer now have known adult relatives.
The resumption of soybean sales to China this week is encouraging to American farmers who have seen the value of their crop plummet amid a trade war with the world’s second-largest economy, but producers see it only as a small step and say they need more federal aid.
Private exporters reported sales of 1.13 million metric tons of soybeans to China on Thursday and another 300,000 metric tons on Friday, the U.S. Department of Agriculture said. The Thursday report was the ninth-largest daily sale since 1977, according to the agency’s Foreign Agriculture Service, and it comes less than two weeks after the Trump administration reached a three-month truce in its trade war with China during which the two sides will try to work out their differences.
Davie Stephens, a Kentucky farmer who serves as president of the American Soybean Association, said the resumption of sales is “positive news” but that “it is vital that this 90-day process result in lifting the current 25 percent tariff that China continues to impose on U.S. soybean imports.”
“Without removal of this tariff, it is improbable that sales of U.S. soybeans to China can be sustained,” he said.
China had suspended U.S. soybean purchases earlier this year but under the truce agreed to buy more U.S. farm products. The country typically buys between 30 million and 35 million metric tons of U.S. beans in a normal year.
News of the U.S. sale might prompt some farmers to sell some of the soybeans they have stored on their farms, in part because South American crops will be hitting the world market within a couple of months, said Huron, South Dakota, farmer Brandon Wipf, who serves on the American Soybean Association board.
“We have a narrow window out of which to operate,” he said. “I think you’ll see some farmers selling, some holding on for a little better prices.”
No beans are moving yet out of North Dakota, which typically sends most of its annual crop to Pacific Northwest ports from which the beans go overseas to southeast Asia.
“It may take some time to get the shuttle trains in place and get ocean-going vessels stationed at the PNW,” said North Dakota Soybean Growers Association Executive Director Nancy Johnson. The sale announced this week is for delivery after the new year, she said, and it did not significantly boost prices.
January soybean futures in early Friday trading on the Chicago Board of Trade gained 40 cents to about $9.06 a bushel. That’s down from almost $15 a bushel four years ago and nearly $10 a bushel 18 months ago.
Soybean farmers are getting the largest share of a federal program created to compensate producers up to $12 billion for trade-related losses, though this year’s payment of 82 cents a bushel doesn’t match a market price drop of about $2 per bushel since May.
The Trump administration has said another 82 cents might be approved next year if a trade deal isn’t reached. Both the American Soybean Association and the National Farmers Union this week pushed for a second payment while the administration works on a long-term trade solution.
“The farm sector has already lost far more value to this trade war than the (compensation) payments will provide, and damages due to lost markets will persist long into the future,” Farmers Union President Roger Johnson said. “The administration should be doing everything it can to protect the men and women who feed, fuel and clothe this nation.”
North Dakota U.S. Sen. John Hoeven, chairman of the Senate Agriculture Appropriations Committee, said Friday that he stressed the importance of the second payment to Office of Management and Budget Director Mick Mulvaney.
Not getting a second payment could be a “deal-breaker” for some farmers in terms of their support for the Trump administration, according to Wipf.
“They would see that as a broken promise by the administration,” he said. “We’re of course encouraging the administration not to make the miscalculation that this little bit of detente we have with China has suddenly fixed all the problems we have.”
China is officially buying U.S. soybeans again, which is good news for American agriculture. This week’s purchase amount was one for the record books.
A Farm Journal report says the latest U.S. Soybean Export Sales Report from USDA shows that China bought 1,130,000 metric tons of soybeans. To give that amount some perspective, it’s the ninth-largest one-day purchase in ten years. It’s also the biggest Chinese soybean buy in the four years. It’s also the biggest soybean buy of this year, so far. President Trump told Reuters that, “They’re buying tremendous amounts of soybeans. They’re definitely back in the market.”
Reuters says it seems to affirm the trade truce that the U.S. and China reached on December 1st. We still don’t know if China’s retaliatory tariffs on U.S. soybeans and other farm goods will be dropped as a part of the temporary truce. There’s also no word on whether or not the countries can resolve the longer-term disputes, including forced technology transfers and intellectual property theft within 90 days. That’s when President Trump said additional tariffs will go into effect and the trade war will resume
While the U.S. and China have reached a deal for China to buy U.S. agricultural goods, the market is waiting for China to drop tariffs before transactions take place.
Reuters reports no substantial purchases can happen with a 25 percent duty still in place on U.S. soybeans, corn, sorghum and wheat, according to buyers and analysts. China over the weekend agreed to a trade war ceasefire, and the White House said China had promised to buy an unspecified but “very substantial” amount of agricultural, energy, industrial and other products, with purchases of farm goods to start “immediately.”
Though, Agriculture Secretary Sonny Perdue says the purchases will likely start next month. China’s foreign ministry said on Monday that the two presidents had instructed their economic teams to work towards removing all tariffs. Until then, Brazil is nearing harvest season of its soybean crop and, being cheaper, could instead supply China’s soybean needs.