China fallout may see US soy, corn secure domestic SA market share

The fallout from any pecuniary action from China on soybean imports could see the US take share from South America’s non-China export markets as well as targeting Brazil’s domestic soybean demand, market sources told Agricensus.

If China levies a 25% tax on US soybean exports, both Brazil and Argentina are likely to step up their soybean export rate to capture US market share, including starving the domestic markets of soybean supply.

“We might even see some US corn and meal being imported into Brazil [to] supply the domestic market with US meal and we use the beans to export,” one Brazil-based source said.

Argentina may also look to the US, with trading sources in the country saying some of the major players had started crunching numbers to test the feasibility of the move.

“Last week some trading houses were running numbers for the October-December positions, to see if importing US soybeans into Argentina was possible,” the second trading source said, although noting that Paraguay would be the preferred supplier to the country’s crushers.

According to government export data, Brazil and Argentina exported 68.1 million mt and 7.3 million mt of soybeans respectively in the 2017 calendar year, with China importing 60.3 million mt – just under 85% of the two countries combined exports.

The domestic markets, and the remaining 15% of countries receiving Brazil exports may provide a softer landing for US exporters should China slam the door shut on the US soybean sector.

“There is probably some merit to that based on what flat freight spreads are… The non-China business that Brazil gets, I would assume that all has to go to the US, so that puts a bit of a floor under a US demand collapse,” US-based analyst Kelly Herrick told Agricensus.

Outside of China, Brazil sold more than 1 million mt in 2017 to countries such as Spain, Thailand, the Netherlands, Iran, Russia and Taiwan.

However, with some countries amongst that list already ruled out through existing sanctions, many of the others may have issues potentially importing GMO soybeans.

Argentina is likely to produce some 47 million mt of soybeans in the 2017/18 marketing year, although that figure has been revised downwards as drought hits the country, while Brazil is forecast to grow 113 million mt, according to the USDA’s WASDE.

China is set to consume 110.8 million mt, with 97 million mt coming from imports.

Brazil’s domestic demand is set to account for 46.5 million mt, with Argentina consuming 47.62 mil-lion mt to feed its domestic crush capacity.