It's not all bad news for U.S. soybean farmers when it comes to the trade spat with China.
While looming tariffs are likely to curb American exports of the commodity to China, opportunities are opening up in the European Union, the world's second-largest importer.
The dispute has boosted prices in Brazil, forcing EU processors to look elsewhere for supplies. That's likely to put the U.S. on track to overtake Brazil as the biggest seller to the 28-nation bloc next season, according to Rabobank International Ltd.
"If China implements tariffs, we believe the EU will import more U.S. beans than Brazilian origin," said Michael Magdovitz, a London-based oilseeds analyst at Rabobank, a lender to agricultural commodity traders. "The discounted price of U.S. beans compared to Brazilian origin will cause that to happen."
Trade tensions between the U.S. and China have intensified in recent weeks, with China vowing to retaliate against President Donald Trump's threatened tariffs on another $200 billion of Chinese imports. China is the world's largest importer of soybeans, partly used to make animal feed, and the prospect of fewer shipments from the U.S. has increased premiums for the oilseed in the Brazilian market.
As of Wednesday, futures of soybeans for loading at the Brazilian Port of Paranagua in September were at a premium of $1.95 a bushel on the Chicago Board of Trade, according to Sao Paulo-based broker Ary Oleofar. That's double the price from a month earlier.
The EU is the second-largest importer of Brazilian soybeans, and the South American nation was the main seller to the bloc for at least six seasons, according to data from the Brazilian government and the European Commission. That could soon change, as a potential trade war is forecast to increase China's share of South American soybean imports to 90 percent from June to December, according to estimates from Hamburg-based researcher Oil World.
China could replace about 4 million metric tons of U.S. soybeans with Brazilian supplies in the fourth quarter if tariffs are implemented, according to Rabobank. Those losses would be partially offset by 2 million tons of non-China demand moving from Brazil to the U.S., driven largely by the EU, the bank said.
"It's already happening," said Pedro Dejneka, partner at Chicago-based MD Commodities. "While China concentrates its purchases on Brazil, the rest of the world turns to the U.S."
Business on 06/29/2018