Soybean Export Update

US Losing Seasonal Soy Sales to Brazil, But Demand Remains Despite Coronavirus Challenges

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The U.S. Soybean Export Council is holding a virtual conference this week with soybean traders around the world. While the U.S. is losing its seasonal sales to Brazil, demand for soybean products globally remains strong. (Logo courtesy of the U.S. Soybean Export Council)

GLENWOOD, Iowa (DTN) -- The coronavirus has halted parts of the economy, but leaders from the U.S. Soybean Export Council are highlighting that the industry continues to export and look at market opportunities even through the pandemic.

This week, USSEC is holding a virtual conference with roughly 2,000 people watching its panel discussions on trade from as many as 100 countries.

"Throughout the conference, we've showcased that despite the global impacts of the novel COVID-19 virus, the U.S. soy industry is open for business," said Jim Sutter, CEO of USSEC. He added that the checkoff-funded trade group has adapted its work to connect with customers virtually.

Speaking to reporters Wednesday on a video conference, Sutter stressed "it's more important than ever" to demonstrate the value and benefits of buying U.S. soybeans and oil products.

WORLD SOYBEAN DEMAND REMAINS STRONG

According to last week's sales reports from USDA, overall soybean sales for the 2019-20 marketing year were at 32.1 million metric tons (1.18 billion bushels), about 4% higher than the same period last year. Soybean meal sales are roughly equal to last year, and soybean oil sales are 28% higher than last year, driven partially by new market sales to Africa, even though they have declined in Asia.

The supply chain in Europe continues to operate despite some anxiety about port operations. Europe has imported about 6.8 million metric tons (250 million bushels), which is roughly 21% of soybean exports, said Brent Babb, USSEC's regional director for Europe, Middle East and Africa.

Overall, the hiccups have been minor, Babb said. Europe is seeing more demand for poultry, eggs and pork products, all of which are driving more demand for soybeans as well. Soy oil exports to Europe are more of a concern because biodiesel sales have been limited, and there is also less demand for oil used in restaurants.

In the Middle East and North Africa, food security remains a concern, so supplies to that regions have increased as well. Babb also said Egypt, the third-largest customer for U.S. soybeans, also continues to increase its soybean crush capacity.

"I know that countries in North Africa are trying to address food security, and the governments are working with the food industry to make sure those supplies continue," Babb said.

Parts of Asia, particularly Japan and South Korea, are reflecting similar demand for soybeans as last year. U.S. soybean sales to South Korea are down some because of competition from less expensive soybeans coming from Brazil right now. Soybean oil sales are down slightly to Asia because of the closure of hotels and restaurants there as well.

"On the other hand, Japan and [South] Korea are significant soy food markets, and we have significant market share, over 70% when the two are combined, and that's been actually a bright spot because, particularly in Japan and Korea, they perceive soy foods as having a lot of health benefits," said Rosalind Leeck, USSEC's senior director for North Asia.

OPTIMISM ABOUT U.S.-CHINA PHASE-ONE DEAL

The state of exports to China and the phase-one deal between the U.S. and China also drew a lot of discussion in USSEC's virtual meeting, Sutter said. The general theme from analysts was optimism that China would meet its obligations, but likely not until later in the year. So far, China has not asked for a delay.

While tariffs on soybeans have not been removed, China has granted waivers to "many importers" who have taken advantage of that, Sutter said. Shipments to China have been slowed because of the Brazilian soybean harvest, and Brazil has been aggressively selling crops, he added.

"If anything, that is sort of exaggerated this year because of the weak Brazilian currency relative to the U.S. dollar, and it makes their commodities look very cheap relative to U.S. commodities," he said.

By the middle of this year -- sometime between May and August -- is when China should shift to the U.S. for soybeans, Sutter said. He noted analysts and "boots on the ground in China" are all noting demand is good for soybeans right now. Demand is stronger than expected because the country is rebounding from African swine fever faster than anticipated, he said.

"We are still optimistic that the phase-one deal will be upheld or that China will live up to those agreements," Sutter said. "It will be heavily done in the last half of this calendar year."

Lately, China has been drawing down on its soybean reserves, having turned over roughly 500,000 metric tons to COFCO just last week. Sutter said it's unclear exactly how much the reserves have dropped, but he said the industry has repeatedly estimated China has drawn down its national reserves by roughly 10 mmt (367 million bushels). Sutter expects China will replenish those stocks, largely because today's soybean prices are considered cheap.

"The Chinese are very astute historically as to when they put things into these reserves, so I wouldn't be surprised sometime in the next few months that they start to put soybeans back into the strategic reserve," Sutter said.

If Sinograin, China's state buyer, starts to purchase larger volumes of beans, that would be a signal the country is restocking, Sutter said.

CONTAINER-DISLOCATION RUMORS ADDRESSED

Sutter and others also said market rumors about dislocation of containers isn't actually that significant. Staff for Clarkson Grain, which specializes in shipping by containers, said at the virtual conference they have not had problems.

"We have heard about worriers over container supplies from people," Sutter said. "I don't know how severe the actual constraint is on our ability to ship with containers. Clearly, we need to get the containers flowing around the world ... I'm not really sure how it is affecting shipments, but I know it is a big worry for people."

Leeck added there were some concerns over containers being out of position globally. In South Korea, there has been some concern expressed, but no significant challenges have cropped up.

"Certainly, there have been some delays but nothing that has caused a major supply issue for our importers," Leeck said.

PREPARING FOR PLANTING SEASON

Farmer leaders for groups such as USSEC are largely preparing to plant, said Monte Peterson, USSEC's chairman and farmer from Valley City, North Dakota.

When asked about how soybean producers are managing financially right now, Peterson credited agricultural lenders for working with farmers as much as possible on their cash flow and balance sheets.

"I have certainly heard that younger producers, those that are not as well established, are bothered by tight cash flows and increased concerns from their lenders about borrowing working capital to get the crop in," Peterson said. "With that being said, though, I think that lenders are finding a way."

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton