Another important reason why investors have not rushed to buy soybeans is because there’s “some skepticism about the substance of any (trade) deal,” wrote Caroline Bain, chief commodities economist at Capital Economics.
In 2017, the U.S. exported $40 billion worth of grains and soybeans, of which China accounted for $15.5 billion, she noted.
If Beijing were to spend an additional $30 billion that it reportedly pledged for U.S. soybeans and grains, it will have to spend three times more than the $15.5 billion it spent on American agricultural exports in 2017 before tariffs kicked in.
That would be “difficult to achieve,” Bain said in a recent note, adding that China has little appetite for other grains from the U.S., as its imports of wheat and corn are “tiny” and the country is essentially “self-sufficient.”
“Meanwhile, the US already provides 85% of China’s sorghum imports,” Bain added, leaving soybeans from America as the only thing that matters.
Despite analysts’ reservations about Chinese demand for soybeans, however, Beijing last week raised its forecast for soybean imports for the 2018-2019 crop year to 85 million metric tons — up from its previous 83.65 million tons in last month’s outlook.
It came after China suspended imports of canola from a Canadian company. Canola is a common alternative to soybeans.
— Reuters contributed to this report.
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