southcentral Minnesota | farmer4321 - 7/6/2018 06:57
China has vacuumed up every spare bean to be found in Brazil, The WASDE shows Brazil's exports to be over 70 MMT up from 63 MMT last year. You can bet that 7 MMT went to China. I suspect that WASDE's 70 MMT is underestimated by a bunch. Meanwhile, keep in mind that the next biggest market for beans is Europe at 16 MMT. How much can they increase their demand? 10%, 20%?
Demand is not a zero-sum game. There has been very real demand destruction for US beans. While US exports to China decline in the last nine mouths of the market year we normally exported an average of 100,000 MMT even while China turns to Brazil. That 4 MMT didn't happen this year. That's why were down to 27 MMT from the usual 33-35 MMT. That extra 100 million bushels are still sitting someplace waiting to find a home.
Furthermore, the thing that prevents Brazil's expansion isn't the lack of land, it the cost of the 6 ton per acre for the lime need to make beans productive. We have just handed the Brazilians the incentive and the means to expand, namely money. By the time they start planting in Oct. they will have already started that expansion.
Interesting, world consumption is increasing at a 14-15 mmt pace, production is expected to decline that much this year so we still need next year to dramatically increase to a level above last years production just to keep up to demand worldwide.
A tariff is not an embargo and as such industry only looks at price and needs, if our soys are cheap enough a tax on top of that bean still makes it cheaper than Brazilian beans theyll buy them thus it’s still a matter of undercutting us on price. It’s not as big a windfall as you think and it’s not been that good for those Brazilian farmers as you think. Expansion has to happen no matter what just to keep up with demand as yields don’t seem to have that capability in the long run. |
When tariff issue is resolved, do cheap soybeans destroy ending stocks.
