January 8, 2020 / 8:31 AM / 15 days ago

Column: Late-year surge in U.S. soy, pork exports driven by China

FORT COLLINS, Colo. (Reuters) - Bigger shipments to China late last year substantially increased U.S. soybean exports and lifted pork exports to record-high levels, but the soybean numbers are still not great relative to previous years and the pork figures are less impressive when China is removed from the mix.

A pen of young pigs is seen during a tour of a hog farm in Ryan, Iowa, U.S., May 18, 2019. REUTERS/Ben Brewer

The United States exported 7 million tonnes of soybeans in November according to data published on Tuesday by the U.S. Census Bureau. That is the largest total for any month in exactly two years though notably lower than the 2013-2017 November average of 9.8 million tonnes.

Some 4.2 million tonnes of U.S. soybeans sailed to China in November, and that was also by far the largest volume in two years. But that figure is drastically lower than pre-trade war amounts.

In the first quarter of 2019-20, which began on Sept. 1, the United States exported around 7 million tonnes of soybeans to China, and that compares with less than 300,000 tonnes a year earlier. However, during the same period in the four years prior to the trade war, shipments averaged 16.7 million tonnes.

Weekly export inspection data published by the U.S. Department of Agriculture suggests lighter overall shipments in December of around 5.2 million tonnes. That includes roughly 2.3 million to China.

Using those December assumptions would place year-to-date U.S. soybean exports at 22.1 million tonnes, some 46% of the 48.3 million-tonne annual target set by USDA. In a normal year, closer to 56% of the yearly volume is shipped in the first four months of the marketing year, but due to China’s relatively irregular purchasing habits as of late, this is of less concern.

The bigger concern is that total sales for the 2019-20 year had reached only 29.5 million tonnes as of Dec. 26, an eight-year low. Also, there were significantly fewer soybeans waiting to be shipped as of Dec. 26 than in prior years, including last year. USDA sees 2019-20 exports rising 1.5% from the previous year, though the agency will have a chance to adjust that number on Friday.

China, the world’s largest soybean buyer, has said it would increase purchases of U.S. farm products once the Phase 1 trade deal is signed with the United States, which is set to happen next week.

However, no specific figures have been confirmed and there is a lot of uncertainty over China’s exact needs given its struggles with African swine fever (ASF) over the last year and a half. Questionable Chinese demand, whether in the context of ASF or the trade agreement, will likely ensure that the discussion around U.S. soybean exports will remain somewhat complex through at least the next several months.

SURGING PORK SHIPMENTS

ASF has significantly reduced China’s own pork production, and that has been beneficial to global suppliers who have seen a boost in business to the Asian country as a result. The United States shipped 259,814 tonnes of pork in November, an all-time high for any month.

China was the top destination for U.S. pork in November with 78,776 tonnes, some 30% larger than the previous record monthly volume set in July 2019.

Total 2019 U.S. pork exports through November were a record 2.39 million tonnes, but if shipments to China are subtracted, the volume is a three-year low and about 5% below 2018’s high for the period.

As of Dec. 26, nearly 345,000 tonnes of U.S. pork were on the books to be shipped in 2020, with about 96,000 tonnes slated for non-China destinations. That is above the recent average for the date, though it will be important to monitor these “other” sales going forward as huge Chinese purchases may continue to overshadow demand from the rest of the world.

CORN DOWN BUT WHEAT UP

Sluggish exports have been the theme so far in the 2019-20 U.S. corn marketing year, and that trend continued into November with just 2.5 million tonnes, a four-year low for the month.

Between September and November, U.S. corn shipments totaled 6.8 million tonnes, the slowest start to a marketing year since 2012-13, which immediately followed one of the worst harvests in U.S. history.

Brazil picked up a lot of the slack late last year, exporting a record 16.7 million tonnes of corn between September and November, some 65% more than a year earlier.

The slow U.S. export pace likely continued into December, with inspections implying corn shipments around 2.5 million tonnes, and that would be a seven-year low for the month. Total sales for 2019-20 were also at a seven-year low as of Dec. 26 and some 43% below the same date a year earlier.

USDA sees 2019-20 U.S. corn exports reaching 47 million tonnes, a seven-year low once again, but down only 10% from the previous year.

On the other hand, U.S. wheat exporters had a great November with 1.8 million tonnes shipped, the largest volume for the month since 2010. That brings shipments for the first half of the 2019-20 marketing year that began on June 1 to 12.9 million tonnes, some 8% larger than the five-year average.

December wheat exports were likely around 2 million tonnes, also above the recent average. Shipments in the second half of 2019-20 must slightly outpace those of the first half in order to reach USDA’s full-year forecast of 26.5 million tonnes, which would be a three-year high.

The opinions expressed here are those of the author, a market analyst for Reuters. 

Editing by Matthew Lewis

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