China soybean tariffs to hit South-America’s crush: Rabobank

South America’s global soymeal market share will decline if China taxes US imports of soybeans, as US crush margins would widen, increasing meal exports and undercutting its southern neighbour, Rabobank said Thursday.

The proposed tariffs on US soybeans by China would have “severe” implications on global trade, the Dutch bank said, shifting China’s soybean demand – the largest net importer – from the US to South America.

China imports 90% of its soybean needs, of which 34% are sourced from the US, and Chinese crushers would not be able to pass on the inflated costs.

Reduced demand for US beans, partially offset by rising exports to the EU and South-East Asia, would drag down US prices, while American farmers would opt to plant more corn and fewer beans, the bank said.

However, the fall in US bean prices would widen local crush margins and increase US crush rates, as the country becomes a more dominant soymeal exporter fuelled by an increasing global demand for protein.

Meanwhile, a rise in Chinese demand for South American beans would have a bullish effect on local bean prices, while global soymeal prices will be capped by the rise in cheaper American soymeal exports.

South American soymeal prices will have to rise to ensure a viable crush, “but this will weaken the price-competitive advantages of South America as the leading soymeal exporter,” the Dutch bank said.

Longer term, the Dutch bank expects an expansion in crush capacity in the US, EU and South-East Asia, with limited growth in South America and China, while South America, the EU and China would each increase soybean plantings.