The USDA's China -- Oilseeds and Products Update released on Monday may point to a difficult year ahead for oilseeds markets, with a focus on developments on the demand side.
China's 2019-20 production is estimated at 16.8 million metric tons, slightly below the USDA's official forecast of 17 mmt and up 5.7% from the previous year. Yields were revised higher this month while the increase is also tied to producer subsidies which in turn led to increased acres.
The USDA's attache report increased total domestic consumption estimate for China modestly to 99.8 mmt for 2019-20, but this remains well below the 103.7 mmt official estimate released by the USDA, as well as the official estimate of 103.1 mmt for 2018-19 and 106.3 mmt in 2017-18.
This in turn is viewed to pressure imports, with imports pegged at 83 mmt, unchanged from the previous May report. This remains well below the 87 mmt official estimate released by the USDA in June and is one number that will be closely watched in Thursday's July report. The attache report also pegs 2018-19 imports at 84 mmt, below the USDA's official 85 mmt estimate as well as below the 2017-18 official estimate of 94.095 mmt.
While we are a long way off from South American new crop production, the June World Agricultural Supply and Demand Estimates (WASDE) report pegged Brazil's production at 123 mmt (117 mmt) and Argentina's production at 53 mmt (56 mmt), with 2018-19 production estimates in brackets.
All this data poses a growing challenge for Canada's exports, where tensions with China have already limited exports to this country in 2019. As reported in the Canadian Grain Commission's Exports of Canadian Grain and Wheat Flour for May, cumulative exports are reported at 3.5173 mmt, up a modest 102,100 metric tons from the same period in 2017-18.
This report shows cumulative exports to China of 3.0558 mmt, up 1.7 mmt, or 126%, from the same period in 2017-18. The concern is that this volume was shipped almost entirely by the end of December. Since December, exports to China have totaled only 10,200 mt. Minimal volumes were shipped in January and February, while nothing was reported in March, April and May.
Soy Canada officials have long stated that challenges exist for Canada's industry due to a reduced flow of soybeans from North America to China. As this takes place, competition is expected to increase within other markets as U.S. marketers also turn elsewhere due to the 25% import tariff imposed by China.
Canadian Grain Commission data shows that of the 18 countries listed where Canadian exports were reported in 2017-18, cumulative exports through the month of May have fallen year-over-year in 15 of these countries. The drop totals 1.7798 mmt and marginally offsetting the year-over-year increase in export volumes reported to China. This data also includes nine countries where volumes were traded in 2017-18 and have fallen to zero (or close to it) in 2018-19, the largest declines being the Netherlands at 393,200 mt and Italy at 385,600 mt. As of June 27, the USDA reports Accumulated Exports into the European Union at 7.2228 mmt, up 71% from the same period in 2017-18, highlighting the increased competition faced in global markets outside of China.
The CGC's data shows only three countries where sales have been increased year-over-year (excluding China), which includes Ireland, Bangladesh and Cuba, with the year-over-year increase totaling a modest 179,700 mt.
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