Canada eyes soybean boost in US-China trade spat

Chicago

CANADA, a relatively modest participant in the global soybean market, is poised to leap into the fray with a chance to boost exports to China, which has shunned shipments from the US amid an escalating trade war.

"There's a big opportunity for Canadians to fill some of that void that we're seeing" in China, Joel Merkosky, co-president of Johnston's Grain brokerage in Calgary, said.

The conflict between China, the world's top soybean consumer, and the US, the biggest exporter behind Brazil, means traditional trading patterns have gone haywire. Argentina, the leading shipper of soybean meal, took the unusual step of buying the oilseed from the US to meet domestic demand while shipping its own crop to China. That shift may also occur in North America.

"You're going to see more US beans come into Canada, and more Canadian beans go to China," Mr Merkosky said.

Brokers such as Johnston's Grain are looking at importing cheap US soybeans into Canada for processing, and exporters may explore "arbitrage opportunities" for shipment overseas, Mr Merkosky said. Prices for US soybeans have plunged as demand from China declined and a bumper harvest looms.

Farmers in Canada are currently harvesting soybeans and canola to make meal for livestock and oil for cooking and fuel.

In the past two decades, Canada became the fifth-largest soybean exporter as farmers expanded acreage. Overseas sales are a fraction of the 75 million tonnes from Brazil and 56 million tonnes from the US forecast to be shipped during the 2018-2019 crop year, according to the US Department of Agriculture.

The USDA this month lowered its forecast for Canada's shipments during the 2018-2019 crop year to five million tonnes from an earlier estimate of 5.5 million as drought reduced the crop. Still, Canada has exported 156,000 tonnes of soybeans since Aug 1, more than double the same period a year earlier, the latest Canadian Grain Commission data showed. The data did not break down shipments by destination. BLOOMBERG