After their Dec. 1 meeting at the G-20 summit in Buenos Aires, Argentina, President Donald Trump and China’s President Xi Jinping pushed the “pause” button for 90 days on the escalating tariffs between the two countries. The news came with Trump’s assertion that China will begin to “immediately” purchase more U.S. agricultural products, including soybeans.

This assertion was affirmed less than two weeks later when USDA announced that China purchased 41.5 million bushels of soybeans, doubling its total purchases of 2018 soybeans to date.

Cautiously heralded by U.S. farm organizations as the first good news on the trade front they had received for some time, Nebraska Farmer visited with Jim Miller, a Belden, Neb., farmer and former chairman of the U.S. Soybean Export Council (USSEC), about his observations on soybean trade.

Miller has nearly 20 years of experience as a leader in the soybean industry, beginning with his participation in 1999 in the American Soybean Association and DuPont Young Leaders Program.

Just over a year ago before the trade war began, Miller traveled to China representing USSEC, where the organization signed a letter of intent with China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal Byproducts. This meeting, attended by Trump and Xi, represented soybean sales between the two countries valued at $3.4 billion. A second signing during the meeting was valued at an additional $1.6 billion.

But a lot can happen in a year. “Since the tariff announcement, exports and prices have went exactly how I thought they would,” Miller said. “China said they would retaliate against soybeans. Exports to China have almost stalled.”

Miller said customers in China still want to buy U.S. soybeans, but they do not want to go against their government.

Before the implementation of tariffs on Chinese products that resulted in 25% retaliatory tariffs on products from the U.S., like soybeans, China was by far the largest customer for U.S. soy, purchasing over 60% of all soybeans raised in the U.S. as whole beans, soybean meal or soybean oil.

“Trade agreements are important because they lower or eliminate the duties or tariffs imposed on our products going into that country,” Miller said. “Trade agreements also give that country confidence that we will be a reliable trading partner.”

Although China was the largest customer for U.S. soy, there were barriers to trade. “China was complaining about foreign matter in U.S. soybeans,” Miller said. “The U.S. has 2% FM for our contracts, while South American countries have 1% FM content for their contracts.”

Miller said that South American countries have a smaller sieve for testing FM levels, which gives them less FM levels and an advantage over U.S. tests. This was a point that USDA was working on to level the playing field so all the grain is inspected in the same manner.

“China was also complaining about protein content of U.S. soy,” Miller said. “Studies have shown that protein content from all regions of the world are going lower. The U.S. is always lower than South American soybeans in protein, but in turn, the U.S. soy has a higher digestible amino acid content.”

This means that livestock fed U.S.-grown soybean meal has a higher feed efficiency and better average gain, resulting in a lower cost of production.

“These are things USSEC continually shows the international customer through feeding trials conducted around the world,” he said. “China says they are lowering the protein requirements in the feed, but this may lower rate of gain and add to the days on feed.”

New trade opportunities
The good news about the slowing of China sales is new trade opportunities with other countries, such as the European Union, Egypt, Pakistan and Bangladesh.

“USSEC continues to do trade servicing events around the world to bring buyers and sellers together to show the buyers the quality of U.S. soy products and to build trust and relationships,” Miller said. “Right now with the slowdown of exports out of the Pacific Northwest, USSEC is putting more emphasis on countries like Vietnam, Thailand and Indonesia to get more exports moving out of that region.

“The only good thing about the lower prices is that it is allowing some of the smaller countries to be able to purchase U.S. soy and see the advantage of U.S. soy products.”

The USDA Foreign Ag Service has offices in countries around the world. “Several years ago, FAS expressed interest in Africa, so through a program that ASA calls the World Initiative for Soy in Human Health, we have been working in several African countries, getting them to use soy for human consumption,” Miller said. “Once a country starts to purchase $5 million worth of soy products from the U.S., then WISHH turns the country over to USSEC to continue to develop and grow the market.”

Miller said USSEC is also looking at India, because they have just as much population as China and is very protein deficient. “If the India population would just increase their consumption of eggs and poultry meat, it would create a huge demand for soy protein that India could not produce. Myanmar is another country that is interested in growing their aquaculture industry and is purchasing more soy from the U.S.”

Another factor to recognize is that China may have stopped buying from the U.S., but some of our soybean sales to Argentina and other countries are sent to China instead. “China is still getting U.S. soy, just with a middle man in the transaction,” Miller said.

You can learn more about soybean trade developments at ussec.org.