Canada Markets

China Moves Quickly to Brazil's Soybean Supply

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue bars represent Canada's monthly soybean exports to China in 2017/18, while the grey bars represent 2016/17 exports, measured against the primary vertical axis. The black line represents China's share of total monthly exports in 2017/18, while the yellow line represents this relationship for 2016/17, measured against the secondary vertical axis. (DTN graphic by Cliff Jamieson)

Thursday's weekly sales and shipments data in the U.S. shows cumulative U.S. sales of soybeans down 9% from the same period last crop year while shipments of soybeans are 13% behind the year-ago pace. The USDA's supply and demand estimates released Thursday also point to a reduction in the potential for U.S. exports, as well as exports from Argentina in 2017/18. Meanwhile Brazil is the beneficiary with estimated exports revised higher, given growing world demand in 2017/18.

As discussed in Wednesday's Canada Markets Blog, Canada's soybean exports are expected to reach a fresh record in 2017/18 of 5.6 million metric tons, according to Agriculture and Agri-Food Canada's latest estimates. Year-to-date exports as of January, or the first five months of the crop year, are pegged at 3.4 mmt, up 3.6% from the same period in the previous crop year.

One thing noted following the release of Statistics Canada January trade data on Wednesday is the collapse of soybean business with China in the month of January, as that country shifts its interest to South America, a move seen much earlier than experienced in past years.

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As seen on the attached chart, Canada's total exports to China in January were 1,357 metric tons (blue bar), down from 346,917 mt shipped in December and down from 300,889 mt shipped in January of 2017 (grey bar). While one month's data does not make a trend, China went from being Canada's No. 1 customer in December to No. 16 in January.

The black and yellow lines point to the year-over-year change in the share of exports to China as a percentage of total monthly exports. The biggest spread is seen in the month of January, when shipments to China accounted for 67.6% of total shipments (yellow line, measured against the secondary vertical axis) in 2017, while the black line reflects movement to China accounting for just .4% of total shipments in 2018.

This data points to the short window of opportunity to move significant volumes into this market in order to facilitate Canada's expanding soybean production, as well as how quickly the opportunity can evaporate, forcing exporters to expand their list of customers.

In January 2017, five of 29 recipients of Canadian soybeans were shipped a volume of 10,000 mt or more, which in total accounted for 91% of the total volume shipped. In January 2018, seven of 35 recipients were shipped a similar volume, which made up 85% of total shipments.


DTN 360 Poll

This week's poll points to the International Energy Agency forecasting that Canada's oil-by-rail movement will double from historical highs over the next two years, and asked if the agriculture industry should be concerned. You can weigh in with your thoughts on this poll located at the lower right side of the DTN Canada Home Page.

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