U.S. Soy Exports Won't Reach Pre-Trade War Levels for Years

(Bloomberg) -- Sign up for our new China newsletter, a weekly dispatch on where China stands now and where it's going next.

U.S. soybean exports won’t return to their pre-trade war peak levels until the 2026-2027 season as competitors in South America gain global market share.

That’s according to long-term projections released Thursday by the U.S. Department of Agriculture on its website. The outlook assumes China’s retaliatory tariffs stay in place.

Demand for American soy has taken a hit after China slapped tariffs on a host of U.S. farm goods as part of the nations’ trade war. At the same time, production has increased in rival producers including Brazil, the world’s largest exporter.

U.S. Soy Exports Won't Reach Pre-Trade War Levels for Years

“Record production as well as trade issues are lowering our expectation for soybean exports relative to last year’s projection,” Robert Johansson, the USDA’s chief economist, said in a telephone interview on Thursday.

Other factors limiting export growth include more domestic use for livestock feed and “muted” interest by farmers compared with a year ago in expanding acres and production, he said. Relatively weaker currencies in Brazil and Argentina also have made their supplies more attractive abroad, he said.

Recent Return

While China has recently returned to buy U.S. soy, the buying hasn’t moved prices much. Purchases have been so small they haven’t made up for the lost sales. Meanwhile, bumper crops means silos and grain bins across the Midwest are full of inventories. Soybean futures traded in Chicago are down about 12 percent over the past year.

America’s farmers -- part of the base that helped drive Donald Trump’s election victory -- have been the unintended victims of many of the administration’s policies. After the trade war sparked declines for crop prices, the president rolled out aid payments to help soften that blow.

Net farm income is expected to reach $77.6 billion this year, up from $69.2 billion last year, but will stay under $80 billion through 2028, according to USDA projections.

“If tariffs are lifted, the prospect would be better for higher levels of trade,” Johansson said. “If we didn’t have the tariffs in place, exports would be higher and farm income would likely be higher as well.”

Thursday is the deadline for farmers to apply for the aid tied to tariffs, the so-called market facilitation program.

“The bailouts did help out some," Lynn Rohrscheib, chairwoman of the Illinois Soybean Association, said in an interview with Bloomberg Television this week. “But most farmers, they just didn’t want that. We want to be able to grow our crop and receive a fair price.”

Rohrscheib said she knows of some producers who aren’t farming this year because of the tariffs, and that her family “took a $600,000 hit to our annual income” as a result of the trade war.

More details on U.S. soy exports:

  • The U.S. exported a record 58.96 million metric tons in the 2016-2017 season as demand from China surged, historical USDA data show.
  • Shipments fell to 57.9m tons in the 2017-2018 season, according to Thursday’s outlook. The 12-month season starts Sept. 1.
  • A year ago, the USDA had no projections for a decline in U.S. exports and was expecting that “strong global demand for soybeans -- particularly in China” would drive sales higher for the next 10 years, according to a February 2018 report.
  • Now, the agency says exports won’t top the 2016-2017 peak until the 2026-2027 season. Meanwhile, South American exports are expected to climb over the period, including from Brazil and Argentina.
  • The tables released Thursday are part of a fuller USDA report on the long-term outlook that is scheduled to be issued March 13.

©2019 Bloomberg L.P.