The global soybean market will have a tough job in 2020 adapting to the impact of the most recent chapters of the US-China trade dispute, the prolonged influence of African swine fever on Chinese consumption and the rise of Brazil to the top spot in global production rankings.
The US-China trade dispute has dragged on for 17 months after initial tariffs went into effect July 2018. Over the period of continued negotiations, additional tariffs have been added by both countries. The prolonged uncertainty transferred the majority of China’s 2018 soybean purchases to Brazil. US soybean exports to China have seen a sharp increase compared with 2018, but major purchases have only been executed when the Chinese government has issued tariff exemption waivers to drive the trades.
The new year is expected to bring confirmation of and more detail on phase one of a trade agreement between the US and China that includes a commitment by the latter nation to buy an additional $32 billion of American agricultural products over a two-year period.
On the last day of the year, US President Donald Trump used Twitter to say he will be signing a “very large and comprehensive Phase One Trade Deal with China on January 15.”
That deal should set the tone for 2020, but its exact consequences are still unclear. While it is a positive development for the longer term for US producers, it may have limited impact on the US soybean market during the current marketing year. Chinese crushers are understood to have covered most of their needs through January, and once the harvest of Brazil’s new crop is completed, US soybeans will no longer be being offered at competitive pricing.
In Brazil, the deal has cooled trading activity in recent weeks, as market participants wait for more clarity on Chinese demand for both the short and the long term.
Questions remain around what actual demand for soybeans in China will be in 2020, as the country tackles African swine fever outbreaks with new sanitary measures, changes in pork production systems and an increase in meat imports.