Translating the U.S. / China Soybean Situation
By Brooks York, AVP of Producer Services
The markets suddenly came alive over the last week. For the first time in nearly a year, traditional sale signals have triggered. RSI moved north of 80 earlier in the week, Managed Money is carrying a long position and we were nearly 8% higher than the crop insurance Projected Price. It was surprise, but one that was welcomed by a lot of farmers!
One of the primary motivators of this jump in soybean prices was the U.S. / China trade meeting that occurred in the closing days of October. There was a lot of publicity around the event, with little of it really diving into the numbers. With all the numerical conversions and vague expectations, we can get lost in a hurry!
First, most of the world reports their export/import data in million metric tons or “mmt”. While a U.S. ton is equal to 2,000 lbs, a metric ton is equal to 2,204.62 lbs. This means that one metric ton is equal to 36.74 bushels of soybeans.
1 metric ton = 2,204.62 lbs = 36.74 bushels of soybeans
Entering the year, there was an expectation that China would purchase 22 mmt of U.S. soybeans. That is equal to 808 million bushels and represents nearly half of our total estimated exports for the 2025/26 crop year. It would be nearly 19% of the estimated 4.3 billion bushels of soybeans that U.S. will produce this year.
Earlier in the year, China was expected to buy nearly 19% of the U.S. 2025/26 soybean production
Most readers know the narrative of the U.S. / China trade relationship over the past 10 months. At the lowest point, it was feared that China would only buy 5 mmt of U.S. soybeans. That would be nearly 17 mmt below our expectations!
After the most recent trade meetings, it now seems that China and the U.S. are poised to make deals on more soybeans, but it still remains to be seen how many bushels this will equate to before South American soybeans hit the market in late February.
China has verbally mentioned additional purchases that would yield a total of 12 mmt of total purchases, while the U.S. suggests that number could be as high as 15 mmt before the South American supply is ready for markets. While export traders see these as possible outcomes, they all recognize that it will be a stretch to realize either of these possibilities in the window available.
It is interesting to note that after the trade meeting with the U.S., China purchased six additional cargoes of soybeans from Brazil over the weekend. While this is not unexpected, it is not the posture that the U.S. wished to see immediately after the meeting.
Some independent analysts believe the total purchases will be closer to 10 mmt of soybeans, or 367 million bushels. This would be a far cry from the 808 million bushel expectation earlier in the year.
Many believe 10 mmt of Chinese purchases is a likely scenario
After over $1.00/bushel gains on the Chicago Mercantile Exchange, it's natural to wonder what the market sees in these numbers. While there is never a clear cut answer, it is important to remember a few caveats of worldwide trade.
First, we must remember that the primary motivation for China to buy from South America instead of the United States is price and availability. Historically, Argentina prefers to export soybean meal rather than raw soybeans. In fact, there are tariffs in place to help prevent soybeans being sold in place of soybean meal. This year those tariffs were temporarily lifted and soybeans were sold to China. This displaced a portion of what would normally have been bought from the U.S. later in the year.
It also displaced some traditional buyers of Argentine soybean meal. Which means those buyers will have to find soybeans and soybean products elsewhere on the globe. Most of these purchases will likely be from the United States. The two buyers most affected by this will be the EU and Mexico, and both will probably look to the U.S. to fill the void. The speculation is that the EU will come shopping for an additional 6 mmt tons of U.S. soy and Mexico will look for an additional 1-2 mmt from the U.S.
This makes for a very complicated formula to see exactly where our domestic balance sheet will land. Just for fun, let’s take a look at the formula:
Scenario 1:
22 mmt (original Chinese purchase expectation)
15 mmt (U.S. new expectation of Chinese purchases)
= 7 mmt (void created by deficit of purchases
6 mmt (additional EU purchases from U.S.)
1 mmt (additional Mexico, etc. purchases from U.S.)
= 0 mmt net change from original expectations
Scenario 2:
22 mmt (original Chinese purchase expectation)
12 mmt (China's new expectation of Chinese purchases)
= 10 mmt (void created by deficit of purchases
6 mmt (additional EU purchases from U.S.)
1 mmt (additional Mexico, etc. purchases from U.S.)
= 3 mmt net decrease in U.S. exports
Scenario 3:
22 mmt (original Chinese purchase expectation)
10 mmt (Independent analysts' new expectation of Chinese purchases)
= 12 mmt (void created by deficit of purchases
6 mmt (additional EU purchases from U.S.)
1 mmt (additional Mexico, etc. purchases from U.S.)
= 5 mmt net decrease in U.S. exports
There are simply too many moving parts and assumptions to know where we will land for certain, but we do recognize the importance of our largest importer of American soybeans. Compounding the uncertainty of American stocks of soybean is a final U.S. yield that will not be known for some time.
It is important to remember that the market generally provides opportunities in times of uncertainty. We are certainly in those times at the moment. Hopefully, American farmers can reap the benefits of higher soybean prices before we know the answers to all of these questions.