The United States has been recently shipping larger amounts of soyabeans to destinations other than China, including those who are not heavy US customers, and the increased activity has some market participants skeptical as to why these other countries would suddenly need so many soyabeans.
It is easy to lose sight of soyabean demand in other countries when China accounts for nearly two-thirds of all global imports. But many countries around the world have expanded crushing capacity in recent years, opting to produce their own soyabean meal instead of importing all their meal needs.
The historically wide price disparity between No. 2 exporter the United States and No. 1 Brazil begins to explain the world's recent appetite for US beans. Brazil is typically the main global supplier from April through September, but the attractive US prices drove some of Brazil's usual buyers north of the Equator.
On July 6, China slapped a 25 percent tariff on US soyabean imports, and it has indirectly hinted at a complete boycott of the US product if necessary. Higher costs for Chinese importers combined with the larger non-Chinese purchases of US beans have caused market speculation that other countries are taking advantage of friendly prices and turning around and selling beans back to China for a profit, though there is no solid evidence of this.
The cynicism is understandable, especially given the frustration over depressed grain and oilseed futures, driven largely by global trade tensions. But there is no reason to take a pessimistic stance on non-China soyabean demand. According to the US Department of Agriculture, global domestic soyabean consumption excluding China will reach a record 242 million tonnes in 2018/19, some 5 percent greater than last year and the largest annual gain in four years.
US soyabean processors have been crushing massive volumes of the oilseed in recent months based on healthy margins stemming from low acquisition costs. Processors and end users in other countries are finding the same value, and they have been importing more soyabeans as a result.
This includes relative newcomers to the industry such as Pakistan, Egypt and Vietnam, but also applies to traditional importers such as Europe and Mexico. Unfortunately for US shippers, the increasing demand from other countries would not fill the void if China were to walk away entirely. The United States shipped a record 59.2 million tonnes of soyabeans in 2016/17, and about 61 percent of those cargos landed in China.
USDA's most recent figures show global soyabean production outpacing consumption by around 13 million tonnes in 2018/19, though it is still early in the marketing year. It is more important to recognize that increasingly more countries are structuring their industry on imports of foreign soyabeans to be crushed domestically.
European Union countries, especially the Netherlands, have been importing larger quantities of US soyabeans as of late. Between April and June, the United States shipped 1.25 million tonnes of beans to the EU, double the volume of the same period a year ago and the largest for that timeframe in 32 years.
The soyabean market perked up late last month when it appeared that US and EU leaders worked out a deal where EU countries would import more US soyabeans, but several European traders correctly pointed out that the recent increase in purchases has to do with the price opportunity only, not with politics.
There is no reason to question Dutch importers' motives for increased US purchases, though. USDA predicts that EU countries will import 15.8 million tonnes of soyabeans in 2018/19, up 12 percent from the previous year, and the Netherlands will play a big role.
According to a 2017 USDA report, the Netherlands was the second largest importer of soyabeans and derivatives in the world in 2016 behind China, taking in 4.4 million tonnes of soyabeans and 3.1 million tonnes of soyabean meal. About 40 percent of that imported volume was used domestically.
The Dutch livestock sector accounts for most of that usage. In 2016, the Netherlands ranked first globally in exports of eggs and products, third in dairy and broiler meat, fifth in beef, and sixth in pork. The combined value of these exports was $15.8 billion.
The Dutch port of Rotterdam is certainly equipped to handle huge shipments of soyabeans. As of 2012, Rotterdam was the sixth-largest port in the world in terms of annual cargo tonnage. The rest of the top ten ports were in Asia, seven of those in China.
Rotterdam's location is strategic as it connects the sea with major waterways in Europe, namely the Rhine River that runs through Germany and ultimately links Eastern and Western Europe.
US Census Bureau data shows that during the first nine months of 2017/18 (through June), the United States shipped 1.45 million tonnes of soyabeans to Pakistan - more than all previous US shipments to the Asian country, combined.
Pakistan's tariff structure now favours importing soyabeans over soyabean meal, and increased demand from the country's feed sector, especially poultry, has boosted the need for crushing infrastructure. The broiler sector was expanding by 10 percent annually as of two years ago, according to USDA.
In late 2015, USDA's attach? in Islamabad reported that a total of 88 plants across the country could handle an annual crushing capacity of 4.5 million tonnes, but there is good reason to believe it is larger today.
Pakistan imported 1.25 million tonnes of soyabeans in 2015/16 and USDA predicts this will reach 2.35 million in 2018/19. Pakistan imported virtually no soyabeans prior to 2014, and it grows next to nothing.
The United States has shipped a record monthly volume of soyabeans to Egypt in every month during the first half of 2018, totaling 1.6 million tonnes and doubling the previous high for the period. USDA's Cairo attach? earlier this year attributed the rise in imports to the vast expansion in local crushing capacity.
USDA pegs Egypt's soyabean imports at 3.15 million tonnes in 2018/19, nearly double the volumes of five years earlier. The United States was Egypt's top supplier of soyabeans in calendar year 2017 and the African country also grows a negligible amount.
Mexico has long been a top US bean buyer as it imports nearly ten times what it grows to meet domestic livestock needs. Mexico has also stepped up its crushing, which is expected to reach a record 5.2 million tonnes in 2018/19, some 29 percent larger than five years ago.
Other countries in which soyabean crush has expanded notably over the past few years are Iran, Russia, Turkey, South Africa, Bangladesh, Vietnam, among others. The latter two were basically processing no soyabeans 10 years ago.