Smaller soy exporters on the rise amid global demand boom

Chicago

WHEN it comes to soybean exports, Brazil and the United States lead the discussion, as an average of 84 per cent of the world's soy shipments have originated in one of the two countries over the past 50 years.

But global soybean exports have doubled within the last decade based on rapid demand growth worldwide, and this has made room for other countries to build up export markets of their own. Argentina is also a traditional exporter of soybeans, though it has recently been overtaken by neighbouring Paraguay and Canada.

Soybean exports are on the rise in nontraditional suppliers.

USDA's 2018-19 world soybean export target is 156 million tonnes, and removing Brazil, the United States and Argentina reveals some 18 million tonnes left on the balance sheet to be covered by other countries. That is about a third of the volume shipped by the United States in 2017-18. Given the trade conflict between No 2 supplier the United States and top buyer China, many market participants wonder where the other options may lie for Chinese crushers and how much US soy business may be siphoned away should a trade war resolution fail to arrive quickly.

The US Department of Agriculture predicts US exports to reach 51.7 million tonnes (1.9 billion bushels) in 2018-19, but some analysts doubt this is possible even with China's recent return to the US market, as the total purchases remain relatively small.

In an email message last week, a USDA representative said the agency does not forecast trade shares, so it is unclear just how much China factors in to the full US programme. However, USDA did say in its reports that US soybean business to non-China destinations is expected to be much heavier than in prior years.

USDA data suggests China will account for 59 per cent of global soybean imports in 2018-19, its smallest share in eight years. This partially reflects the rising protein demand and crushing infrastructures worldwide, reminding market participants there is a growing need for soybeans in countries other than China.

Aside from the European Union which is expected to import nearly 16 million tonnes of soybeans this year, some 13 countries are scheduled to take in more than 2 million tonnes in 2018-19. Argentina is traditionally the third-largest exporter of raw soybeans, though it will fall to No 5 in 2018-19 , according to USDA's projections.

A drastically different outcome

The agency believes Argentina will be a victim of the US-China trade war, which will create stiff competition with Brazil and potentially the United States if supplies there are cheaper.

But Argentina's Rosario Grains Exchange predicts a drastically different outcome, recently saying this year's exports could reach a record-high 14 million tonnes, a sharp rebound from last year's 4 million.

USDA data suggests that following its historic drought a year ago, Argentina was the sixth-largest exporter of soybeans in 2017-18, following Paraguay, Canada and Ukraine. Aside from the traditional three exporters, there are four other countries that are shipping notable soybean volumes: Paraguay, Canada, Ukraine and Uruguay. Together, USDA predicts these countries will export nearly 17 million tonnes of soybeans in 2018-19.

China also dominates Canada's soybean export market, and increasingly so in recent years. Four years ago, about 21 per cent of Canada's beans were sent to China, but that share rose to 44 per cent two years later. USDA predicts Canada will ship a record 5.3 million tonnes of soybeans in 2018-19, making it the fourth-largest supplier.

USDA has slated Paraguay as the third-largest soybean exporter for the second year in a row, but the landlocked South American country should not compete for trade business with China, at least not directly. Paraguayan soybeans often have higher protein levels ideal for blending with lower-protein beans in foreign crush operations. Therefore, Argentina has recently become a major importer of its northern neighbour's soybeans. Other typical markets for Paraguay include Turkey, Russia and the European Union.

USDA sees Paraguay's exports in 2018-19 falling to 5.8 million tonnes from last year's high of 6.2 million based on lower exportable supplies.

Ukraine's primary oilseed is sunflower, but soybeans are on a steady rise in the country, and USDA predicts its soy exports will reach a record 3.1 million tonnes this year. In the last couple of years, the main destinations for Ukrainian soybeans have been Turkey, Iran, and Egypt. Various European Union countries also partake, particularly Greece and Italy. REUTERS