Global and SA Agricultural ViewpointNovember 26, 2018
Agbiz/IDC Agribusiness Confidence Index falls to the lowest level in 9 yearsDecember 4, 2018
- This week starts with a positive message for soybean markets as the White House indicates that China has agreed to start purchasing agricultural products from US farmers immediately.i This follows what is termed a ‘successful’ meeting between the US and Chinese presidents over the weekend, as the two countries work towards resolving the ongoing trade dispute. While the US exports a wide range of agricultural products to China, such as cotton, sorghum, pork, tobacco and potatoes, amongst others, soybean is the leading product in value terms. Hence, it was the agricultural product most affected by the retaliatory tariffs introduced by China a few months back. Over the past five years, the US exported on average about 48 million tonnes of soybean per annum. About two-thirds of this was destined for China. The other notable markets for US soybeans are Mexico, Indonesia, Japan and the Netherlands. Within the Chinese soybean market, the key US competitors are Brazil, Argentina and Uruguay.
- In years with no trade friction, the US soybean exports to China continued with minimal interruptions throughout the year, with significant volumes of over 15 million tonnes typically observed in the fourth quarter each year, followed by the first quarter with over 5 million tonnes (Figure 1). It is unclear if this trend will continue this year. While the weekend communication from the White House signals cooperation within the two nations, we are yet to see if there will be an increase in activity on the ground. Within the Chinese soybean market, Brazil has emerged as a key supplier in the midst of ongoing US-China trade dispute, and it is likely to remain so, given the expected record harvest of 121 million tonnes in the 2018/19 production season.
- From a South African perspective, the above-mentioned developments will have minimal direct implications in the near term, albeit South Africa is a net importer of soybean oilcake. Over the past 10 years, about 98 percent of South Africa’s soybean oilcake imports originated from one country – Argentina. If anything, the impact of the trade dispute could be through price transmissions in the near term, except if the US starts to push for market access in the South African soybean oilcake market. This wouldn’t be a surprise as we recently saw a similar situation in the poultry sector. In such a scenario, local farmers’ incomes would be pressured, while users of the product would benefit.
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Sourced: Agbiz, Agribusiness Research