Chinese Soybean Tariffs: The Effects, Challenges and Opportunities

 
China is the world’s biggest buyer of soybeans, and more than a third of its needs have been coming from the United States. But since China put a 25 percent tariff on soybean imports from the U.S., exports to China have dropped like a rock.
 

 
You can see what China had been buying from the U.S. in the past years, compared to what the situation is now. And, according to Agtegra’s Executive Vice President Grain Marketing, Mike Nickolas, it has hit farmers in their pocketbooks.
 
“U.S. soybean stocks are rising, and along with the loss of Chinese business is why the prices are as low as they are. It’s a big hurt to the American farmer which trickles down to main street America.”
 
The Solution, at Least for Now: Storage and Other Markets


Across the country, farmers did a really good job of taking soybeans home, which is exactly what they should have done, given the lower futures and basis prices. Grain company’s aren’t just sitting and waiting for a solution to the Chinese problem. Nickolas says they’re looking to move beans to non historical destinations rather than the Pacific Northwest where our soybeans would typically ship to. 
 
“We’re starting to see some soybean sales to country’s that the US does not typically sell to.  We are currently shipping soybeans to St Louis where they are loaded on barges destined to the center gulf, the soybeans are then loaded on ships to their final destination. That’s where our soybeans are probably going to flow to in the near future, unless the Chinese come back in the market.”
 
Processors Are Stepping Up Too


The other opportunity comes from the soybean processing markets, they also experienced a lack of farmer movement at harvest time.
 
“We’re starting to see the processing markets firm their bids,” Nickolas says. “They experienced the same thing that we did, soybeans stayed home so they have to strengthen their basis values in order to draw those beans out of the farmers’ bins.”
 
South American Production Is the Other Key


The weather in South America has been good so far, and farmers there are planting ahead of schedule. Nickolas says there has been adequate moisture in most of Argentina and Brazil.
 
“So what we really need to see is some type of weather event in South America, whether it is delaying the last of their planting or a production type of issue in the next few months that would help our prices here in the United States.”
 
Progress on Chinese Tariffs?


There are a few hints coming out of Washington that the U.S. and Chinese delegations want to have the tariffs go away or at least loosen up. The President and the Chinese leaders are scheduled to meet at the end of November. But, Nickolas still cautions that it’s not going to be easy no matter what happens.
 
“Across the country we raised a pretty big soybean crop, and we’re looking at up to a billion bushel carry out. So even if we get to the point where we’re exporting beans to China again, it’s a very small window, because South America comes in again in January and February when they start their harvest. Our window of opportunity is pretty small, and we’re still going to have a pretty substantial glut of soybeans to carry over into next year.”