As the trade dispute between China and the United States intensifies, China’s dependency on U.S. soybeans may limit its ability to set tariffs, a new Rabobank report says.
After the U.S. government announced trade sanctions on Chinese imports of around $60 billion, China announced it would retaliate. It has announced tariffs of 25% on pork, 15% on nuts, fruits, vegetables, and wine, but has not announced a position regarding soybeans.
According to the report, “If China Strikes Back,” China’s dependency, short-term global constraints, and the complexity required to fully source its feed demand chain may limit its ability to set tariffs on U.S. soybeans. The current global excess soybean supplies available for export from major producing countries would not be able to compensate for an unexpected disruption of U.S. soybean flows to China. Brazil already exports upwards of 74% of its soybeans to China, and it won’t have the immediate capacity to meet new needs, Rabobank says.
However, Rabobank estimates that if China increases current tariffs and cuts U.S. soybean imports by 100 million bushels, U.S. soybean farm prices will decline from current levels “by around 4% to 5% in the very short run.”
“We anticipate that prices will recover as U.S. soybeans will remain competitive and will likely find other markets such as Mexico, which continues to expand its animal protein platform. However, soybeans are likely to lose ground to corn in the competition for planted acreage in the U.S. This will impact production areas, which are becoming reliant on soybeans for rotation and even as a primary crop,” the report says.
For more information on the report, contact RaboResearch Food & Agribusiness — North America.