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Soybean Trade X China - What Moves If the Tariff Remains

Soybean Trade X China - What Moves If the Tariff Remains

June 21, 2018 | |
  1. The US takes the Brazilian share of the non-Chinese imports.
  2. The US takes a portion of the soybean crush from Brazil. 
  3. Miscellaneous.

 

    Soybean Exports

    Click here to interact with this map.

    1. 15 MMT.  Pre-tariff, the USDA had estimated China would take 35MMT of soybeans from the US. Tariffs on US origin soybeans shipped to China would cause the US trade to increase with non-Chinese customers, but how much can really switch? Below is the list of countries that buy US and Brazilian soybeans, along with the amount imported from each origin. The map above also shows the overlapping customers. You can also check out our interactive map that provides more detail. There are 12MMT that could easily switch to US origin. There are another 3MMT that Brazil ships to non-Chinese destinations that could potentially switch to US origin. Leaving about 20MMT that China would buy as soybeans from the US with the tariff. Argentina exported 6.9MMT of soybeans last year, of that 6.15MMT went to China. Given that, and the reduced Argentine crop,  Argentina is not part of this discussion. In the current marketing year the US has increased shipments to non-Chinese destinations by over 3MMT. 
    2. 4 MMT. The tariff distortion would also put US exports at a disadvantage to US crush. The increase in US crush is limited by capacity. We estimate the US could expand crush by 4MMT given the right economic incentives. The tariff provides a 25% premium to crush versus exports. The US crush expansion would leave 4MMT more in Brazil to export. 
    3. 4 MMT. Miscellaneous includes: expanded Chinese soybean production (+1MMT), expanded Chinese imports from Paraguay, Uruguay, and other origins, currently accounting for 15MMT of Chinese imports (+3MMT). 

     

    Doing the math: 35 – 15 – 4 – 4 = 12MMT that China would be left to buy from the US. The US loses 23MMT of exports, but all but 4MMT(150 mil. bushels) are either crushed or exported to other destinations. We have done the price analysis in a prior blog.  I would estimate less price impact from our prior analysis. Separating the emotional impact from the fundamental impact remains difficult. Let’s hope logic prevails. 

     

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