Chinese buyers continue to turn their backs on Canadian soybeans.
The latest data from Statistics Canada confirms industry fears, says Soy Canada executive director Ron Davidson.
“The numbers are clearly substantiating what the exporters are telling us, which is essentially the Chinese importers aren’t interested in purchasing Canadian soybeans right now,” Davidson said.
He added the primary reason for that is there is concern about what would happen at the point of arrival.
“We’re not aware of any formal dictate from the Chinese government (not to buy Canadian soybeans) at all,” Davidson said. “Basically it seems importers are concerned… and they have an option. They can go to South America.
“With those combinations of factors we’re not selling there right now. And we’re hopeful to get back in.”
Since March Chinese buyers haven’t bought any Canadian canola seed, after complaining shipments were contaminated with weeds and plant diseases. However, Chinese government officials have declined a face-to-face meeting with Canadian regulators to discuss the complaint.
That’s led to speculation China is signalling its displeasure with Canada’s arrest late last year of Meng Wanzhou, vice-president of Chinese technology firm Huawei, at the request of U.S. government.
Despite the diplomatic spat, in total, Canadian crop exports to China are running ahead of last crop year.
Statistics Canada says China imported just 3,000 tonnes of Canadian soybeans in March, putting total imports January to March at 5,398 tonnes, compared to 72,000, 470,000 and 916,000 during the same period in 2018, 2017 and 2016.
In the last four months of 2018 China imported a record 3.2 million tonnes of Canadian soybeans, but since Dec. 31 average imports during the first three months of 2019 (5,398 tonnes) versus the last four months of 2018 (799,675 tonnes) dropped 99.8 per cent.
Since the start of the current crop year Aug. 1, 2018 and March 31, 2019 Canada exported 3.056 million tonnes of soybeans to China, up 1.741 million tonnes during the same period last year, Canadian Grain Commission (CGC) figures show.
In fact, as of March 31, and with four months left in the current crop year, Canadian soybean exports to China were almost double the 1.644 million tonnes exported during all of the 2017-18 crop year.
Despite the high volume of exports in 2018, in its May 7 stocks of principle field crops report, Statistics Canada said as of March 31, Canada had a record 2.9 million tonnes of soybeans on hand, up 4.3 per cent from 2018.
“Despite a year-over-year increase in exports, record-high beginning stocks for the crop year, coupled with higher imports compared with the same date one year earlier, drove soybean stocks higher on March 31,” StatsCan said.
Notwithstanding the dramatic drop in Canadian soybean sales to China during the first three months of 2019, it’s normal for Chinese demand for Canadian soybeans to decline this time of year, says Bruce Burnett, Glacier FarmMedia’s director of markets and weather.
“We should naturally slow down our exports during this period in time because of South America supplying the global demand,” he said in an interview May 7. “Usually their prices tend to be lower than everyone else’s in this scenario and they gain market share. This is not to dismiss the issues around soybeans and China importing them, but I view it far more as a new crop issue than an old crop issue.”
African swine fever, which is reducing China’s hog population, is also cutting China’s soybean demand, Burnett, added. Soybean meal is fed to hogs.
Canadian soybeans became more attractive to Chinese buyers after their government slapped a 25 per cent tariff on American soybeans, he said. If the United States and China reach a trade deal, which Burnett expects, China will drop the tariff and there will be less demand for Canadian soybeans in China.
Davidson agrees those tariffs played a major role in increased Canadian soybean shipments to China late last year. American soybeans diverted from the Chinese market to other destinations pushed Canada out of its traditional markets making it even more dependent on China, he said.
“Our exports to the European Union plummeted, for example,” Davidson said. “We got shoved out of all these other markets into China, but still we’ve got this record carry-over (as of March 31) out there and we have to go and sell somewhere and go head on against the American prices everywhere else. It’s going to be challenging.”
As Canada was busy exporting soybeans to China, the U.S. was exporting soybeans to Canada, contributing to the record supply as of March 31, Burnett said. It may seem counterintuitive, but it made economic sense, he said. Canada was exporting to China, while domestic crushers imported cheaper American soybeans to crush, Burnett said.
In April Agriculture and Agri-Food Canada (AAFC) forecast Canada would carry over 550,000 tonnes of soybeans when the crop year ends, July 31. That would be lower than 2018, but AAFC might not have anticipated the steep decline in exports to China in 2019.