China is the engine of global soybean demand. The country, which depends on the international market for more than 80% of its consumption needs, could experience a disruption in its supply from the US this year.
As Donald Trump has just taken office, the soybean market is holding its breath. Between feverishness and concerns, market participants are waiting for the first announcements from the new leader, likely to trigger a new episode in the trade war with China…
If there is concern on the market, it is because soybeans could once again be caught in the fire of the tariff escalation between China and the USA. Donald Trump has indeed made the imposition of customs duties a major axis of his trade policy, announcing a global surcharge of 10 to 20% on all foreign products imported by the United States and promising to go up to 60% for certain goods from China. Enough to bring back bad memories on the market.
Indeed, at the height of the tariff battle between the two countries in 2018-2019, the seed had already been one of the main commodities affected by the Middle Kingdom’s retaliatory measures.
In response to the Trump administration’s impositions, China imposed a 25% tariff on U.S. soybeans. This situation has led to the drastic decline in US exports to China.
Anticipating a repeat of this scenario, Reuters reports that Chinese buyers acquired more than normal soybean volumes from the US in the last months of 2024 in the wake of record imports for the year that reached 105 million tonnes, 6.5% more than a year earlier, according to Chinese Customs data relayed by Reuters.
While waiting for the new Trump administration to fire the first shots of this new trade war, analysts believe that Brazil and Argentina should once again be the main winners of a potential slowdown in Chinese demand for American soybeans. 6 years ago, these two countries had already taken advantage of the situation to increase their sales to the Middle Kingdom. In the process, Brazil became the leading exporter of soybeans to China.
Over the past year, in 2024, soybean prices have fallen by 22.8% on the Chicago Board of Trade (CBoT) penalized by the abundant harvest in the US and that expected in Brazil.
For the year 2025, the size of global stocks should again be unfavorable for prices according to several analysts. Already, China’s soybean demand is expected to fall this year, due to the low margins of processors, (difference between the purchase price of the raw material and the sale of its derivatives such as oil and oilcake) which should reduce the country’s overall purchases. Add to this the impact of the trade war, and the outlook for prices is darkening a little more. At the heart of the tariff battle between the US and China, soybean prices had fallen to their lowest level since 2009 in July 2018 on the CBoT.
According to forecasts by BMI Research, a subsidiary of Fitch Solutions, the anticipated weak demand in China should mitigate the impact of the tariff escalation on global prices. In any case, it is already certain that the soybean market will be turbulent in the coming months.
Source : Agece Ecofin