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South America soy growers may get 2-year window for China sales
[MONTEVIDEO, Uruguay] South America's main soybean-producing nations could benefit from higher demand from China through 2020 thanks to a Sino-US trade war, according to one of Uruguay's largest farm companies.
"Uruguay and South America in general have an opportunity as a provider of oilseeds to China, which would stop buying at higher prices from the US," Jose Pedro Sanchez, chief executive officer of Union Agriculture Group Corp, said in a telephone interview in Montevideo.
US soy that otherwise might have gone to China could displace Uruguayan soy in Europe, Mr Sanchez said. In that scenario, China would probably end up buying almost all of Uruguay's soy, he said.
China slapped tariffs on a range of US agricultural products including soybeans earlier this month. Since March, trade tensions and a deep drought have caused Uruguayan soybean prices to trade above benchmark futures in Chicago for the first time in years. China purchased more than 80 per cent of Uruguay's soy in 2017, according to export promotion agency Uruguay XXI.
Mr Sanchez, whose company controls grain trader and farm supplier Granosur SA, said Uruguayan producers that still have soy left over from the 2017-18 harvest should sell at current prices.
"Our recommendation today for 2019 soy is not to sell," he said. "It's best to wait a little for things to calm down."
Uruguayan farmers are recovering from a severe drought that led to output in the 2017-18 season falling to about 1.3 million metric tons from a record 3.9 million tons in the previous season, according to data compiled by Deloitte LLP. The area planted has steadily fallen from a historic high of 1.5 million hectares (3.7 million acres) in 2013-14 as farmers stopped planting the crop on less-productive fields amid rising costs and a drop in global prices.
Mr Sanchez said the acreage may be close to bottoming out at around 1.2 million hectares, but that depends on whether banks will finance planting this season and extend repayment deadlines on existing debt.
"The sector doesn't need soft loans or loan forgiveness. The only thing it needs is more time to pay," he said.