Wandile Sihlobo, Agbiz

Soya bean production remains at the heart of the US-China trade war, hence prices were under pressure on Friday (6 July 2018) on the back of the introduction of tariffs. For context, China is the world’s largest soya bean consumer and heavily reliant on imports. The key underpinning factor behind the country’s appetite for soya beans is the growing demand for animal feed, which in turn has been stimulated by increases in the demand for high protein food. China is a leading market for United States (US) soya bean exporters; therefore tariffs could negatively affect US farmers’ incomes.

The United States Department of Agriculture (USDA) forecasts China’s 2018/2019 soya bean imports at 103 million tons, which equates to a 65% share of global imports. This is 6% higher than the previous season. In the 2017/2018 season, the leading suppliers of soya beans to China were the US, Brazil, Argentina and Uruguay.

The Chinese demand is expected to shift towards South American countries in the next couple of months. Brazil is likely to be the biggest winner due to its large supplies. Brazil’s 2017/2018 soya bean production was at 119 million tons, which is 35% of global soya bean production, and at par with the US harvest. The forecast for the 2018/2019 production season point to percentage point increase to 120 million tons is according to data from the International Grains Council.

Overall, in the near term, the US will probably boost its soya bean exports to alternative destinations which could include Mexico, Netherlands, Japan, Spain and Indonesia, amongst others. These are not big soya bean users, but they are amongst the top ten importers, according to data from Trade Map.

Back on home soil, the harvest process for the 2017/2018 soya bean crop is almost complete. At the end of last month (June), about 94% of the estimated 1.6 million tons of production had already been delivered to commercial silos. An update for the week ending 06 July 2018 will be released on Wednesday. – Wandile Sihlobo, Agbiz

Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.

Find previous reports here.