I know we are dealing with a lot on our home soil, and it is easy to lose track of developments beyond our shore. However, there are other interesting developments in the world of global trade, such as the souring US-China trade relations.
On this chapter, what caught my attention this past weekend was the Financial Times piece entitled “China holds fire on imposing US soybeans tariffs.”
Some have speculated that China’s response or retaliation to the US tariffs would hurt the US soybean sector the most – rightly so – since more than two-thirds of US soybean exports go to China. In fact, in 2017, the US exported agricultural exports to the tune of $19.6 billion to China. Of that, $14 billion was soybeans.
China is the world’s leading importer of soybeans, commanding a share of 64 percent of global soybean imports totalling 151 million tonnes in 2017/18.
In the past five years, the US has been one of the key suppliers of soybeans to China accounting for a nearly 40 percent share of that market, according to data from Trade Map.
Brazil and Argentina were also amongst the key suppliers, hence the talk in the market points to a possible increase in South America’s share of the Chinese market at the expense of the US over the coming years.
Fortunately, soybean hasn’t got a hiding yet (though folks like CHS Hedging argue that soybean is next). China’s counter tariffs announced on Friday included agricultural products such as pork and pork products, horticultural products, wine, American ginseng, and denatured ethanol.
Be that as it may, the spectre of Chinese retaliation will worry the soybean markets for some time. At least, for small soybean producers such as South Africa, there will be a minimal impact in the short term.
Our (South Africa) immediate key risk in this part of the world is the weather. Luckily, good showers are forecast within the next few weeks, which is good not just for soybeans but for all summer crops.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
