U.S. soybean exports have been steadfastly weathering the severe impacts of COVID-19 around the world, but the pandemic is impacting foreign customers in waves and new threats continue to manifest as nations around the world work to keep their people fed.
"I think we’re fortunate that we haven’t been in an industry where we’ve really seen our demand hit hard,” U.S. Soybean Export Council CEO Jim Sutter told Agri-Pulse in an interview. “We’ve seen demand continue to be pretty good around the world.”
Sutter noted the sudden shifts in the sectors as demand dropped from hotels and restaurants, followed by rapid rise of demand at grocery stores.
“I imagine that as we come out of this, we’ll swing the other way,” he said. “We’ll see the (hotel, restaurant and industry) sector ramp up again.”
But there are newly evolving obstacles to get there.
Whether it’s President Donald Trump's latest threats to upset the trade détente with China, the COVID-19 impact on Mexican meatpackers, or port congestion in Vietnam, the ability of U.S. farmers to export their soybeans is coming under a host of new threats.
China
China promises to be a bright spot in the world for U.S. soybean exports this year despite being the first country to be hit by COVID-19. Beijing is widely exempting importers from tariffs in order to comply with the country’s promise under the “phase one” trade deal to boost imports, and it appears to be well on the way to significantly do that.
While China has not laid out publicly how much of each U.S. commodity it will buy to reach the promised $36.5 billion worth of ag imports this year, Sutter tells Agri-Pulse USSEC believes the country's importers will purchase between 30 and 40 million metric tons through December.
“It’s not unheard of,” he said. “I’m cautiously optimistic if (China) follows through we can see them hit those numbers. We’ve seen them start to make purchases of U.S. soybeans.”
Those purchases continued Tuesday. The USDA reported new export sales of 378,000 metric tons of U.S. soybeans to Chinese buyers, 242,000 tons of which is slated for delivery in the 2020-21 marketing year.
China is buying about 8 million tons of soybeans every month, says USSEC analyst John Baize, and by September that will all be coming from the U.S.
The tariff waivers are tied to the smooth implementation of “phase one,” though, and that could get rocky if Trump follows through with new threats to punish China for what he says he believes is the country’s role in starting the COVID-19 pandemic. Trump, speaking to reporters Friday evening on the White House south lawn, confirmed he’s thinking about hitting China with a new wave of tariffs if, as he said he suspects, a Wuhan laboratory was responsible for releasing the virus.
“This is a bad situation. All over the world — 182 countries,” Trump said when asked about new tariffs. “But we’ll be having a lot to say about that. We — it’s certainly an option.”
Jim Sutter, USSEC
Trump even went so far as suggest that China capitalized on the spread of the virus to hurt his chances for reelection because the country would rather see Joe Biden win in November.
“China is a very sophisticated country, and they could have contained it,” he said Friday. “They were either unable to or they chose not to, and the world has suffered greatly.”
Any new tariffs or other forms of punishment from Trump will likely cause problems, says Wendong Zhang, an assistant economics professor at Iowa State University.
“That probably wouldn’t go well with the Chinese public or the Chinese government,” he said.
Mexico
Mexican crushers are some of the most steady customers of U.S. soybeans, and analysts at USDA’s Foreign Agricultural Service expect imports to continue to be strong. But there are troubling signs that the pandemic could take a sizable bite out of trade.
Ricardo Moreno buys soybeans for the company Proteinol, a major soyoil and soymeal producer in Mexico that crushes 80,000 metric tons per month during good times. Times have not been good for the past six weeks as the spread of COVID-19 shut down much of the economy, but Moreno has continued to put in orders for U.S. soybeans — at least for now.
Now that much of Mexico’s restaurants and hotels remain shuttered, and meatpacking plants are showing signs of strains as workers get ill, Moreno said his company is debating whether or not to cut back on soybean imports.
“That’s the question we’re trying to solve,” he told Agri-Pulse. “We pretty much have our soybeans bought through August and we’re at a point where there’s still a question mark for us.”
But companies like Proteinol have already been rapidly adapting to the impacts of COVID-19, and Moreno is generally optimistic.
It was in late March that Mexicans began shunning restaurants and putting unprecedented strains on retail. Moreno said his company shifted quickly away from producing industrial-sized bottles of soyoil to the smaller retail bottles, but there was it quickly maxed out on production. The bump in retail helped offset HRI losses, but not completely.
Now retail demand is dropping from the height of panic, but industrial demand still has not returned, and concerns are rising that meat production will decline.
Nevertheless, FAS analysts are still optimistic that strong Mexican demand will keep meat production high.
They’re predicting Mexico will import 6.1 million metric tons of soybeans for the 2020-21 marketing year, a 100,000-ton increase from 2019-20.
“Although all economic indicators point to serious problems ahead for Mexico’s economy, demand for oilseeds, mainly soybeans, is expected to withstand this global economic deceleration due to the relative inelasticity of food demand,” FAS says in a new analysis.
Vietnam
Vietnamese ports were hit hard during the early weeks of the spread of COVID-19, but traffic is returning to normal and importers are hungry for U.S. soybeans, says Dao Manh Luong, CEO of the Mavin Group, an integrated company composed of crushers, feed makers and meat producers.
The country is rebuilding its swine herds after a devastating outbreak of African swine fever, and importers like Luong say they have become fans of U.S. soybeans, preferring them to crops from Brazil and Argentina.
“End users with feed mills, like us, prefer to buy from the U.S.,” he said in an interview.
But in 2019, the U.S. lost a big chunk of its market to South America due to an issue with weed seeds. Authorities imposed a zero-tolerance policy on specific weed seeds and became concerned that inspectors there might reject whole shipments.
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The U.S. market share of Vietnam’s soybean imports dropped in 2019 to about 44%, down from about 73% the year before. Likewise, Brazil’s market share rose in 2019 to 39%, up from just 18% in 2018.
That’s not happening again this year, industry and government officials tell Agri-Pulse. USDA worked for months with farmers, groups like USSEC and Vietnamese crushers, the situation has been mostly resolved, and the dockage is not expected to impact trade again, according to a U.S. government official.
Meanwhile, importers in other parts of the world are also expected to continue buying more U.S. soybeans after years of marketing and educational campaigns waged by USSEC.
“In the case of Bangladesh and Egypt, I think we have built a real strong preference for U.S. soy there,” Sutter said.
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