KANSAS CITY, MISSOURI, US – In recent weeks, China has made several huge purchases of US soybeans. In some weeks, the US Department of Agriculture (USDA) reported Chinese soybean purchases on nearly a daily basis. China also has sharply increased its purchases of US corn and even wheat.
China’s increased purchases of US soybeans, corn and wheat partly are tied to that nation’s efforts to meet its import commitments under the phase one trade agreement negotiated with the United States and signed in January 2020.
Strong sales of US corn and soybeans to China also reflected increasing demand in China for animal feed as the nation’s hog numbers rebounded following a devastating assault by African swine fever and as poultry numbers sharply increased.
Yet a third factor in recent brisk US agricultural product sales to China has been typical seasonal trade patterns.
The USDA, in its most recent weekly Export Sales report, said US exports and undelivered sales of soybeans to China for delivery in 2020-21 (which began Sept. 1) as of Sept. 17 totaled 19,241,000 tonnes. This compared with only 2,054,900 tonnes by the same date last year for delivery in 2019-20. Additionally, as of Sept. 17, there were 10,058,9000 tonnes in outstanding sales to “unknown destinations,” many of which may be switched to China.
Confirmed US export sales of soybeans to China for delivery this marketing year already eclipsed those in all of 2018-19 at 16,266,200 tonnes. In 2018-19, when the trade war was at its most bitter point and African swine fever reduced China’s need for soybean imports to manufacture meal, US soybean exports to China totaled 13,369,900 tonnes, down from 27,681,800 tonnes in 2017-18. US soybean exports to China totaled 36,148,300 tonnes in 2016-17.
The USDA in its most recent World Agricultural Supply and Demand Estimates report forecast Chinese soybean imports from all origins in 2020-21 at 99 million tonnes compared with 98 million tonnes in 2019-20 and 82.54 million tonnes in 2018-19. Imports during the latter year reflected reduced demand because of the African swine fever outbreak.
While the recent increase in Chinese imports of US soybeans has been impressive, Brazil is and will remain China’s largest supplier, barring a crop failure in that country. China typically turns to the United States for soybeans once the Brazilian supply runs low. Brazilian farmers currently are planting their 2020-21 crop, and the USDA has forecast it to be that nation’s, and the world’s, largest ever, at 133 million tonnes. In comparison, the 2020 US crop was forecast at 117.4 million tonnes.
Also important, Brazil, not the United States, is the world’s largest soybean exporter. The USDA has forecast 2020-21 Brazilian soybean exports at 85 million tonnes compared with its forecast for US soybean exports in the current marketing year at 57.83 million tonnes. Brazil overtook the United States as the largest soybean supplier to China in 2013.
Currently, the United States is taking advantage of a window of opportunity for soybean sales to China. That window may close once the Brazilian crop is harvested and is available for export.
The USDA’s Foreign Agricultural Service office in Beijing in a Sept. 1 report said, “Due to concerns about supply disruptions caused by COVID-19, China imported record volumes of soybeans from Brazil in May, June and July, landing a total of 30.6 million tonnes from Brazil in the three-month period.
“With the transition from Brazilian to the US harvest/shipping season, Chinese concerns about reliable access to US soybeans due to the bilateral relationship are likely to sustain continuing imports, as importers seek to stock up ahead of what they perceive as a potential supply bottleneck,” the FAS said.
Chinese compliance with its trade commitments under the phase one agreement is measured by calendar and not crop marketing years, and there were doubts as to whether China will or can import what US agricultural and other products and services were spelled out in the accord for 2020.
Secretary of Agriculture Sonny Perdue, addressing a recent farmer forum in central Illinois, told producers, “I think honestly it is going to be tough to meet those numbers. This is just purely a guess; we may reach it by the end of January before Brazil and South America come back into the marketplace.”
Perdue said while there were sales on the books, he wanted to see shipments, as China may agree to a purchase only to cancel it later.
“‘If they continue as they are, I am hopeful that we could see the numbers that we had for this year by the end of January,” Perdue said. “It does appear they are trying, but it remains to be seen if we will make those numbers or not.'”
Bill Lapp, president, Advanced Economic Solutions, Omaha, Nebraska, US, told Milling & Baking News, sister publication of World Grain, “China is significantly short of the stated agricultural import goals of phase one, and despite a recent increase in US ag sales to China, it is unlikely China will reach the goals.”
Lapp pointed out China agreed to import roughly $33 billion in US agricultural products in 2020, and through July, China had imported $7.6 billion worth, or 23% of the annual goal.
“China is also significantly short of overall goals of phase one with purchases of $48 billion (in US products and services) through July versus an annual goal of $143 billion,” Lapp added.
“The United States has already sold 19 million tonnes of soybeans to China for the 2020-21 crop year, more than 10 times year ago-levels and the largest on record (at this point in the marketing year),” Lapp said. “US sales are largely for shipment during the September-January period. After that, Brazil is likely to be the primary supplier to China.”
Lapp pointed out China also has purchased about 10 million tonnes of US corn for delivery in 2020-21, the marketing year that began Sept. 1.
“This could continue, and this is the primary bullish risk for the corn market,” Lapp said. “As with soybeans, a large amount of the imported corn is likely being used to rebuild inventories.”
The USDA said China has purchased 1,473,300 tonnes of US wheat for delivery in the 2020-21 marketing year, which for wheat, began June 1.
“It is unclear if China will purchase large quantities of wheat, either from the United States or other sources,” Lapp said. “Imports during 2020-21 have increased, but not nearly as dramatically as in soybeans or corn.”
The USDA’s current forecast for 2020-21 Chinese wheat imports from all origins at 7 million tonnes compared with 5.38 million tonnes in 2019-20 and 3.15 million tonnes in 2018-19.