China pauses US soybean imports for 1st time since 2018
What's the story
For the first time since November 2018, China has stopped importing soybeans from the US. The move comes as a result of continued trade tensions between the two economic superpowers. Instead, China has turned to Brazil and Argentina for its soybean needs. China's General Administration of Customs data revealed that imports from the US fell to zero last month, down from 1.7 million metric tons a year earlier.
Trade dynamics
High tariffs and old-crop beans traded
The sharp decline in US soybean imports can be attributed to high tariffs imposed by China on American goods. Also, previously harvested US supplies, known as old-crop beans, have already been traded. Wan Chengzhi, an analyst at Capital Jingdu Futures, said "this is mainly due to tariffs," adding that "in a typical year, some old-crop beans would still enter the market."
Import shift
Surge in Brazilian and Argentine shipments
China's soybean imports from Brazil and Argentina have surged amid the trade tensions. Last month, Brazilian shipments surged 29.9% year-on-year to 10.96 million tons, making up 85.2% of China's total oilseed imports. Shipments from Argentina also rose significantly by 91.5% to 1.17 million tons or 9% of the total.
Import surge
Record high soybean imports for China
China's total soybean imports hit 12.87 million metric tons in September, marking the second-highest level on record. However, it has not purchased any US soybean cargoes from this autumn's harvest. The window for US soybean purchases is closing fast as buyers are locking in shipments through November, mainly from Brazil and Argentina.
Future challenges
Potential supply crunch
If no trade deal is reached, US farmers could lose billions as Chinese crushers continue to buy from South America. However, China could also face a potential supply crunch early next year before Brazil's new crops come into the market. Johnny Xiang of AgRadar Consulting warned that "a soybean supply gap may emerge in China between February and April next year if there's no trade deal in place."
Negotiation updates
Trump optimistic about soybean deal
Despite the trade tensions, US President Donald Trump has expressed optimism about a soybean deal. He said yesterday that he believes such an agreement will be reached soon. From January to September this year, China imported 63.7 million tons from Brazil (up 2.4% YoY) and 2.9 million tons from Argentina (up 31.8% YoY).