Defaults, defers and delays on as much as two million metric tons of soy shipments to China have U.S. soybean farmers questioning whether the No. 1 importer of U.S. soy will continue to be a reliable market moving forward. But the head of the soy checkoff’s international marketing partner says the market is safe for now.
Delayed shipments out of South America in the spring of 2013 likely caused Chinese crushers to overbuy soybeans this year as they anticipated similar logistical problems. But with a successful harvest and smooth loading conditions, South America’s soybean export deliveries went much better than expected, thus inundating China with an oversupply of soybeans this spring.
“Even with the influx of shipments, Chinese crushers have been working hard to sell soybeans to other countries and delay deliveries with exporters — few have actually defaulted,” says Jim Sutter, CEO of the U.S. Soybean Export Council, United Soybean Board’s (USB) international marketing arm. “Right now, the question is what export demand will look like come fall of 2014. We expect continued demand from China, but with Brazil and Argentina’s improved infrastructure, it’s likely China won’t overbuy again and export volume will be back to normal.”
Exports are an important driver of U.S. soybean farmer profitability. In particular, Chinese customers have been buying one out of every four rows of soybeans grown in the United States for several years and are off to a record buying pace this year.
Chinese poultry farmers recently cut back on production due to a bird flu epidemic. This has slowed demand for soybean meal, which is the primary protein ingredient in poultry feed. Although Chinese soybean crushing margins reached a low point in the first three months of 2014, they’re expected to return to normal by July or August, according to Soren Schroder, CEO of Bunge Limited.
Even with China’s continued demand, all these factors may have a negative effect on the price of soybeans, says Jared Hagert, USB treasurer and farmer from Emerado, North Dakota.
“China’s current situation in regards to crush margins is the result of many things, including livestock and poultry producers being reluctant to repopulate their herds and flocks,” says Hagert. “This may cause reduced demand for soybean meal.”