FORT COLLINS, Colo. (Reuters) - U.S. soybean shipments have rebounded from last year’s trade war-fueled lull, but recent volumes and sales are well off normal levels and February exports were alarmingly low, raising concerns for the rest of the 2019-20 season.
The United States exported 5.32 million tonnes of soybeans in January, up 10% from last year but down 19% from the 2014-2018 average, according to data published on Friday by the U.S. Census Bureau.
Some 40% of the January soybean volume was shipped to top buyer China, which is below the 2014-2018 average of 62%.
Export inspection data published by the U.S. Department of Agriculture on Monday suggests that around 3.2 million tonnes of soybeans left U.S. ports in February, which if realized would be a 14-year low for the month. The data also implies last month’s bean exports to China were around 600,000 tonnes, and that would be the lowest February volume in 20 years and the lowest for any month since April 2019.
According to USDA’s export sales report, as of Feb. 27, there were just 293,000 tonnes of purchased soybeans left to ship to China by the end of the marketing year, well below the latest five-year low of 1.4 million tonnes on the same date in 2016. This raises serious questions about the rest of the 2019-20 marketing year and whether USDA’s export forecast is too aggressive.
Total U.S. soybean exports between September and February, the first half of the marketing year, likely came in just below 31 million tonnes. That is up 14% on the year but is otherwise an eight-year low.
USDA’s latest 2019-20 export forecast of 49.67 million tonnes (1.825 billion bushels) would mean that some 18.8 million tonnes must be shipped in the second half of the year. That is about 8% below last year’s record high and slightly above the previous year’s second-half volume, so it is not logistically unreasonable.
However, a record number of U.S. soybeans would have to be sold in the next several months for this to be possible. Through Feb. 27, about 34 million tonnes had been sold for shipment in 2019-20, meaning there is still a sales deficit of more than 15 million tonnes to reach USDA’s target.
The recent three-year average for second-half soybean sales is 9.5 million tonnes, and those sales are more often to countries other than China.
USDA will publish fresh supply and demand estimates on Tuesday at noon EDT (1600 GMT), and that could include a revision to U.S. soybean exports. The average pre-report trade guess for 2019-20 U.S. soy ending stocks is 426 million bushels, barely changed from January’s 425 million (11.6 million tonnes), suggesting that analysts do not expect export adjustments on Tuesday.
Ever since the trade war began in mid-2018, China’s buying pattern of U.S. soybeans has been less regular, lifting last year’s second-half exports to the Asian country to a record 9.5 million tonnes, nearly double the previous record for the period. Before the trade conflict, around 90% of China’s annual U.S. soybean haul was shipped between September and February.
China’s recent lack of interest has been seriously concerning, as February purchases from the United States likely totaled less than 300,000 tonnes. But China is likely the only buyer that can prop up U.S. bean sales as much as is necessary over the next several months to sustain current export expectations.
U.S. Agriculture Secretary Sonny Perdue said last week that China will likely get more involved in the U.S. soybean market in late spring and summer, which is when Chinese purchases tend to pick up in a normal year. However, the return of Chinese buying at that time is usually for the next marketing year, not the current one as is needed.
Brazil’s enormous soybean harvest, price advantage, and heavy shipping lineup are also of concern for U.S. soybean exporters, as the top supplier is poised to supply China with plenty of soybeans in the coming months.
China’s customs reported over the weekend that soybean imports for the first two months of 2020 came in at 13.51 million tonnes, up 14% on the year and just 3% off 2018’s record.
China last week began to grant tariff exemptions for some crushers to import U.S. soybeans, and those waivers do not have volume limits and are good for one year. Outside of politically motivated purchases, cheap, abundant Brazilian supply will likely prevent the American product from being competitive for Chinese buyers until at least August, which is too late for the 2019-20 marketing year.
However, that does leave room for China to make good on its Phase 1 trade deal commitments for the 2020 calendar year, which almost certainly requires a significant boost in U.S. soybean purchases, potentially to record levels.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Matthew Lewis