Global soybeans with map

Editor’s note: The following was written by Chad Hart, Iowa State University Extension economist, for the February 2019 Iowa Farm Outlook newsletter.


The U.S.-China trade dispute has brought into sharp relief the issues that occur when one country dominates the trade flows for individual commodities.

Grain market outlook chart

When the tariffs hit the soybean market, the impact was substantial, and the global market for soybeans is still being reshaped today, months after the imposition of the border taxes.

Prior to the tariffs, China was the overwhelming destination for U.S. soybeans moving out of the country. Roughly one out of every three soybeans produced in the U.S. was headed that way. The tariffs drastically curtailed Chinese soybean purchases from the U.S. And while China is still our third largest market for soybean exports, the search for replacement homes for those soybeans once headed there continues.

While there is some evidence of sales to China in mid-December (after the truce announcement), the pace of those sales was just enough to maintain the size of the hole in the Chinese markets from the tariffs, as we started December with a 750 million bushel decline in soybean export sales to China and are still there based on the latest report.

The last couple of weekly export reports have included a significant upturn in soybean export sales. China was the major driver behind that upturn.

But overall export pace remains below last year’s levels. Last year at this time, we had soybean export sales of 1.48 billion bushels. This year, the number is 1.1 billion bushels.

But the total gap compared to last year is roughly 380 million bushels, as other countries have stepped in to purchase approximately half of the soybeans that used to go to China. One of the longer-term questions for U.S. soybean producers as we move forward will be whether we can continue to grow these other markets, while working to recapture some of the flows to China.

When we look at the changes in export sales to our largest current markets, it’s a mix of old and new customers.

The European Union, Mexico and Japan have been large purchasers of soybeans in the past. Despite issues over genetically modified crops in the past, the European Union has purchased nearly three times as many soybeans from the U.S. this year when compared to last year. Mexico has nearly doubled purchases, while Japan has increased 16 percent.

On the other hand, we have seen new customers ramp up purchases. With China draining the South American soybean markets after the tariffs were implemented, Argentina had to backfill some of its soybean needs for its crushing facilities. By purchasing 70 million bushels, Argentina has temporarily become our fourth largest soybean market for the year.

We have added eight new countries on the soybean sales list: Argentina, Chile, the Dominican Republic, Georgia, Iran, Nepal, New Guinea and Nigeria. While some of these markets will disappear, for example Argentina, others could turn into longer-run trading partners for U.S. soybeans.

The trade gap is the biggest challenge to the soybean industry for 2019. Along with growing additional markets for direct export, the U.S. soybean industry has looked to other ways to utilize more soybeans. Domestic crush has risen since the tariff imposition and soybean meal exports have increased. In total, meal exports have increased by 15 percent, with the European Union, Colombia and the Dominican Republic leading the charge.

Continued growth in the livestock industries is also helping work through the large soybean supplies.

But as the USDA indicated with its first outline for the 2019 crop year, the challenges in trade will likely lead to a reduction in soybean plantings. The size of that reduction will depend on the ability of the U.S. to hold on to most of these new and/or growing markets and the ongoing negotiations with China.