A new report from Rabobank suggests that a renewed trade war between the US and China could result in the complete exclusion of US soybeans from the Chinese market. While the impact would be less severe than the 2018-19 trade war, the report highlights key changes that could affect US exports.
According to the report, titled “Potential Impacts of US-China Trade War 2.0 on Soybeans,” China is better prepared for a new trade dispute due to higher state reserve inventories, increased imports from Brazil, and changes in feed practices. China has boosted its domestic soybean production and has increased its state reserves by 20 million tonnes between 2021 and 2024.
During the first US-China trade war, China imposed retaliatory tariffs that led to over $27 billion in losses for US agricultural exports. A similar situation could unfold if new tariffs are introduced, particularly targeting grains and oilseeds. However, with Brazil now accounting for 74% of China’s soybean imports, up from 55% in 2018, the share could rise to 80% or more in a renewed trade conflict.
While new US crushing facilities may help mitigate some of the loss, the report forecasts that US soybean sales to China could drop significantly. This could lead to a reduction in US soybean prices and a decrease in planted acres, potentially affecting the broader agricultural economy. The report also notes that compensation for farmers, like the $28 billion distributed during the 2018-19 trade war, may not be available this time.
Additionally, the report suggests that global amino acid prices could rise due to a possible shift in Chinese feed practices, with mills substituting soymeal with amino acids such as lysine and methionine.
Rabobank’s study concludes that US soybeans could face significant challenges in the event of renewed trade tensions, with global market dynamics shifting in favour of Brazil.
