The soybean harvest in the United States (US) is in full swing. Due to the trade war with China, the country has a very large customer loss. Farmers and trade in the US face the challenge of storing the soy (for the time being). The pain of the trade war is now being felt.
Soy growers in the US are working hard to secure the soy harvest before winter sets in. The harvest is lagging behind, partly due to heavy rains at the beginning of October. Yields are expected to be record high and 6% higher than last year (2018: 127 million tons).
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China, normally the largest buyer of soybeans from the US, is virtually no longer a buyer due to the trade tariffs. This means that a large amount of production will have to be stored for a longer period of time.
Also large wheat and corn crops
Meanwhile, the US also has a large wheat and corn harvest to process. In states where many of these grains are grown, this puts pressure on storage. It is true that storage by farmers themselves has been expanded in recent years. In total, farmers can store around 60% of the total harvest themselves.
The fact that exports to China have been decimated mainly affects the Pacific Northwest region (roughly the states of Oregon, Idaho and Washington). In this region the soy is usually loaded for transport to China. The transport routes of soy are now being shifted to river transport to the southern US (Gulf of Mexico). From there it is easier to transport to the EU, among others.
Pain is felt
The $3,6 billion that the US Department of Agriculture is allowed to distribute to soy growers is now a bandage on a wound from which the pain is increasingly felt. Soy growers are currently paid $27 per bushel of soy (1,65 kilos) by the USDA, or $61 per ton. With an average yield of 3,2 tons per hectare, the grower receives $183 per hectare in support.
The pain is being felt now because normally China switches to soy from the US at this time of year, but is now largely failing to do so. Since the harvest in Brazil will not be ready until the end of January, China will probably have to buy from the US over time.
The fact that trade is shifting from the US to Brazil is clearly evident from the export figures. Brazil exported almost 4 million tons of soy to China in the first 3 weeks of October, more than 130% more than normal in the same period. At the current pace of exports, Brazil is expected to be emptied by early December.
China still occasionally buys from the US. For example, it was reported on October 15 that 2 ships carrying soy beans from the US sailed to China. This is because Brazil simply cannot meet the demand. However, China has planned to do without soybeans from the US in the future. How? By feeding pigs and chickens less soy and producing more ourselves in the future. However, that is still in the future, but it is a potential threat to American soy growers.
Backdoor trading
In the meantime, traders are working hard to get the beans into China through the back door. Countries such as Canada, Japan and the Philippines are used as intermediate countries. The demand from other countries for soy from the US has also increased because the other major producer (Brazil) is being plundered by China. As a result, soybeans from the US still manage to find a buyer.
The soybean price in the US has shown an upward trend since week 38, although this trend is cautious. The question is to what extent the large stocks can support a further price increase and whether exports from the US will continue.