When it comes global soybean trade, all interest remains on China. Since the start of the trade dispute between China and the United States, sales to China have dropped considerably. This is not just on old crop soybeans but new crop as well. At the end of the old crop marketing year the United States only had 206 million bushels of new crop sales on the books. This was the lowest amount for that time in the past fourteen years.

Not only is the trade dispute a hindrance for Chinese buying, but so is the ongoing spread of African Swine Fever. Economists claim it could take China from five to ten years to fully rebuild its demand from this disease.

This brings into question just how many soybeans China will need this marketing year. In the 2017/18 marketing year China imported a large 94.1 million metric tons of soybeans. Thoughts were this number would top 100 mmt in the 2018/19 marketing year. Instead we saw this number drop to 85 mmt. This was from the outbreak of African Swine Fever but also from the growing trade tensions between the United States and China.

The question now is how many soybeans China will need to import during the 2019/20 marketing year. The USDA is holding to an 85 mmt projection, but others have lowered this figure to just 80 mmt. Some have even dropped China’s demand to just 75 mmt as the country looks at alternatives to soy meal as a feed ingredient altogether. If China’s soybean demand is this low it could feasibly be covered by Brazil alone. While the United States does have other buyers who have stepped up for our soybean offerings, their buying pales in comparison to the soybeans China was buying on an annual basis.

Soybean futures took a substantial hit recently from news China will be sourcing more protein feeds from Russia. These include soybean meal, sunflower meal and dried sugar beet pulp. While these products will be subject to testing at Chinese ports, they will further reduce the need for China to turn to U.S. soybean imports as the trade war shows no sign of being resolved.

The real question being asked when it comes to Chinese trade is how much business the United States may see even if the trade war ends. China has developed a comfort level with other commodity suppliers, mainly Brazil, and may continue to do business with them after the current trade dispute ends. Given the decline in Chinese demand for soybeans Brazil may be able to supply them with all needs. The U.S. may see elevated meat exports to China though as the country continues to cull hog herds to combat African Swine Fever.

The Chinese government has recently announced it will be making loans to business to help ward off the negativity from the trade dispute with the U.S. This generated ideas that the talks between the two sides are not as optimistic as reported, and China is preparing for an extended period without exports to the U.S.

While most attention when it comes to Brazilian competition in the world market is on soybeans, Brazil has taken away a large portion of U.S. corn export business as well. Data shows that Brazilian corn exports for the marketing year total 20.7 million metric tons compared to 7.5 million metric tons for the same period a year ago. This pace is not expected to slow with August corn exports on track to total a record 8.84 million metric tons. Yearly Brazilian corn exports could top the USDA projection of 37 million metric tons at this pace.

We are at a stage of the marketing year where a shift in interest takes place. Until now much of the interest has been on old crop demand, but now this will shift to not just new crop production but what impact these bushels will have on the commodity market.

The main focal point as we approach harvest is storage and what will be needed. This will undoubtedly vary significantly across the Corn Belt. According to the latest stocks data, the majority of old crop bushels are being held in the Western Corn Belt. This is also where this years crops appear to have the greatest yield potential. In turn this could easily cause storage issues to develop at terminals in that region.

The opposite is expected to happen in the Eastern Corn Belt. Farmers in the east are also holding old crop bushels, but production is more variable. In some instances, terminals do not believe they will have enough inventory to fill this fall, even after harvest takes place.

This commentary is the sole opinion of Karl Setzer, market adviser for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl at ksetzer@agrivisor.com. You can also follow Karl on Twitter via @ksetzergrains.