As the United States and China are on the negotiations table, China has used soybeans as a bargaining tool for gaining leverage over the trade talks about pushing its electronics into the United States. As China has promised of importing more soybeans from the U.S., people still exclaim whether China has the capacity to take so much of soybean or not.
Adding more worries to the tariff war, China has started showing poor import results for soybean due to an outbreak of African swine fever in China. And now it seems like China will not be able to fulfill its promises of fair trade with the United States.
According to U.S. Agriculture Secretary Sonny Perdue, China has promised to buy an additional 10 million metric tons of U.S. soybeans. Along with soybean, China also has pledged to buy $30 billion worth of American farm produce every year.
However, as per the customs data, the imports of soybean have been consistently decreasing over the past months. Last year’s Chinese imports of American Soybean were the lowest in a decade. And the recent data shows that the imports fell by 17 percent from the figures the past years. It is said to be the lowest monthly import in the last four years.
“The trade conflict will certainly be playing an important role because China will no doubt have imported significantly fewer soybeans from the U.S.,” Commerzbank analysts wrote in a note on Friday.
“U.S. export figures had already raised doubts about whether China would buy the promised 10 million tons of soybeans in the U.S. These doubts have not been reduced by (February’s export) data from China,” the bank’s analysts added.
The main issue has been started after the outbreak of African Swine fever in China. Since August 2018, China has reported 111 Swine fever outbreak in 28 of its provinces. As per Chinese reports, 1 million pigs have been culled as of now. As of now, China has only been trying to prevent a spread, but there is no news of a cure or vaccine for swine fever. This fever is highly contagious and affects only pigs. These all factors dragged the demand of soybean down as soy is also used as a feeder for pigs.
China’s pig herd count also fell by 13 percent in January in comparison with the figures of the previous year. The number of breeding sows also went down by 15 percent, according to the data of the Ministry of Agriculture and Rural Affairs.
Darin Friedrichs, a risk management consultant at INTL FCStone’s Asia commodities division, said that the swine fever would definitely take the demand down and it is not possible to make up for the lost pigs.
He also added that there is official ambiguity on when the virus would be under control as Chinese soybean importers, as well as users, are growing uncertain of the use. Along with these factors, the pile of soybean globally stays large as of now.