Importing countries’ increased tariffs on US soya beans could significantly impact the demand for this product.
The increased cost of imports could be the cause for this decrease in demand, as importers may seek out alternative suppliers or reduce their imports.
US Soybeans are less competitive
Tariffs that are higher also reduce the competitiveness of US soybeans compared with those produced in countries where tariffs are lower, or even non-existent. This could result in a decrease of market share.
The Chinese government announced last Friday that it would impose a 34% tariff on any goods imported from the United States.
The new tariffs will be implemented this week in response to recent trade tensions that have risen between the US and Canada.
This decision is likely to impact businesses and consumers both on the Pacific and the Atlantic. It could lead to increased prices, disruptions in the supply chains, or a worsening of bilateral trade relations.
China is imposing additional tariffs between 10 and 15% on some energy products imported from America.
The US announced tariffs in early March. This is the response.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said:
The Chinese agricultural market will likely be much smaller than expected.
It is particularly relevant to soybeans.
China accounts for more than half of US soy exports
Last year, the US Department of Agriculture (USDA) reported exports of 52.4 millions tons of soybeans worth $24.6 billion.
China is responsible for about 50% of the total.
Fritsch stated that China’s imports of soybeans will be dominated by Brazil for the next few seasons due to seasonal factors, and there won’t be any major changes on the near term.
Chinese soybeans purchases in the US usually increase when the autumn harvest arrives.
Fritsch stated that it was unlikely for this to occur in the current year.
Commerzbank predicts that China will continue to import most of its soya beans from Brazil in the autumn of 2019.
Fritsch noted:
The demand for US soybeans will therefore be lower. This should have an adverse impact on price expectations.
On Friday, the soybean price fell below $10 a bushel.
Reduced soybean acres
China’s potential move away from being the US’s primary supplier of soybeans has significant consequences that go beyond their immediate economic impact.
The move may have a cascading effect on the planting plans of US farmers for future seasons.
Farmers may have to reconsider the amount of soybeans they plant if a large importer reduces their demand. They could opt for other crops which offer more stability on the market or are in line with changing global trade dynamics.
The adjustment of planting strategies may have a cascading effect on US agriculture, including crop prices, patterns of land use, and overall sector structure.
The loss of an important export market can have wider economic implications, affecting rural communities, agriculture businesses and the US’s overall trade balance.
The corn acreage could increase
According to the USDA survey, which was released by last week, soybean acres were expected to decline by 4% compared with previous years.
Fritsch stated that the reduction in cost could be greater.
Mexico is the most important client, but China, a lesser-important buyer, was exempted. Fritsch suggests that instead of cutting back on corn planting, it could increase.
It is possible to expand the area planted with spring wheat beyond what was originally planned.
Prices for wheat and corn could fall as a consequence.
The post US Soybean Market Shaken by China’s Fresh Tariffs could be updated as new information unfolds
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