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Email Content: Poultry Industry News, Comments and more by Simon M. Shane

Impact of the Soy Tariff Imposed by China


Following imposition of a 25 percent duty on U.S.-origin soybeans by China, exports declined by 95 percent in the 2017-18 season. Shipments of soybeans to China approximated 600 metric tons by November 1st 2017 with 500 million metric tons to other nations. For the 2018-19 season, total exports through November 1st will attain 750 million metric tons. This figure represents a 50 percent increase in shipments to nations other than China.

The U.S. soybean industry has relied heavily on demand from China. Soybean meal consumption for hogs and poultry in that nation increased by 30 percent from 2014 to 2018. In the current year, soybeans represent 82 percent of all imported oil seeds converted to meal. The rejection of U.S.-origin soybean meal based on costs by crushers and feed mills in China has resulted in disruption in prices and margins.

Following a severe drought and lower production of soybeans, Argentina has increased imports from the U.S. The E.U. raised purchases by 150 percent albeit over a very small base over 2017. Mexico and Egypt have taken advantage of lower U.S. prices to import soybeans from the U.S. In the coming season, Brazil will plant 90 million acres to soy compared to 89 million acres in U.S. in 2018. Russia anticipates planting more soybeans for export to China.

In the November 8th USDA-WASDE forecast issued on November 8th, exports of soybeans were reduced by 12 percent to 1,900 million bushels representing 38 percent of total supply comprising  production of 4,600 million bushels and beginning stock of 438 million bushels supplemented by 25 million bushels imported.

The average farm price for the 2018 season was estimated to be 760 to 960 cents per bushel. Dan Basse, President of AgResource Company opined that if the trade conflict with China cannot be resolved quickly, futures will fall to the lower end of the USDA projection which will be less than the cost of production for most U.S. farmers.

Hopefully some resolution of the trade conflict in the form of actual shipments will emerge from the agreement in principle between the President of the U.S. and the Premiere of China at the G-20 summit. Even if tariffs are removed the U.S. will probably never regain the market it enjoyed in China. The Nation has established alternative sources of oilseeds including canola from India in addition to supplies of soybeans from Brazil and Argentina. Concurrently, China recognizing reliance on foreign supplies of vegetable protein has imposed restrictions on crude protein content of poultry and swine diets which were probably too high in any event.

The main implication for the U.S. poultry industry is that soybean meal will be available at a relatively low cost through 2019. Synthetic amino acid prices are expected to rise given greater demand from China to compensate for lower dietary inclusion of soybean meal and other vegetable proteins. The cost and availability of soybean meal will also be influenced by reduced production of U.S. pork shipped to China to satisfy domestic demand.

Copyright 2019 Simon M. Shane