China Will Buy More Than Just Soybeans

07.03.2019

As trade talks with China march on, all eyes are on the soybean markets. But a trade deal with China could mean increased exports for many other commodities. Rabo AgriFinance put together a “shopping list” of products China will likely begin purchasing if a deal is completed. This week on AgriTalk, Steve Nicholson, grain and oilseed analyst at Rabo, shared some of the products they expect China to buy in addition to soybeans.

“There’s a lot on the [shopping] list,” Nicholson told AgriTalk host Chip Flory, “but there's a lot with a long way to go to get to that.”

While he says soybeans are the most important, he outlined a handful that he sees as equally important to U.S. agriculture.

Wheat.  “It was a goal of the Chinese government to be self-sufficient for grains and primarily wheat, but they're not able to get there,” he said. Chinese buyers are interested in high protein wheat, so he expects hard red spring wheat to attract the buyers. “I think that's really important, that would be one that would help in the PNW area and the Northern Plains obviously.”  

Ethanol and DDGs. “We've had our ups and downs with them on DDGs and they've said they would drop the anti-dumping so that would be a good sign for DDGs and for the ethanol producer, but I think the more important crop will be ethanol,” Nicholson said.

The Chinese have had a goal to transition to E-10 by 2020, he said. “That's next year. That's a pretty lofty goal.”

At this point it would be near impossible for the Chinese to meet that goal by 2020, instead Nicholson said 2025 is more likely. “But the fact is, there's no way they could build enough ethanol plants in China by next year to meet the goal and probably not even by 2025,” he explained. “So the U.S. is in a good place to be able to ship a lot of ethanol right off the West Coast or through the Gulf to China. I think that that's probably the next big opportunity for us as a country.”

Beef, pork and poultry. “I think when we look at what's going on in China right now, pork is certainly gonna be on top of the list with the African swine fever,” Nicholson said adding he’s heard upwards of 30% of the country’s herd will be decimated by ASF. “When you start thinking about China and the number of head of hogs there, it’s a really big number.”

Importantly, Nicholson also pointed out the timing on this is not likely to be what farmers are hoping for.

“We're Americans, we’re extremely impatient and we expect this to happen tomorrow, but this promise to buy really is through 2021 through 2022,” he said. “So, this is a bit of a longer term buy. So while it will be an initial positive reaction, it's going to take some time and the market’s gonna have to spend some time digesting this and figuring out where it's going to go. This isn't just going to happen overnight and be over.”


agprofessional.com

Readers choice: TOP-5 articles of the month by UkrAgroConsult