China has forecast its total soybean imports will be down for the next crop year due to the new tariffs. Another factor is the government is encouraging the use of alternative animal feeds.
Experts say Canada’s canola farmers stand to benefit since the product is used as an alternative livestock feed to soy, although it contains less protein. Canola generates roughly one quarter of all farm cash receipts in Canada.
China is already one of the large buyers of Canadian canola, particularly the raw seed, according to the Canola Council of Canada. And Canola prices have been holding up better than soy prices and some of that could be on the expectation of more China buying.
Still, Baize said shipments of Canadian soy to China should be able to get a premium price over the U.S. beans since there’s no tariff involved but probably won’t fetch as much as Brazilian beans since the protein content is lower. As of this week, Brazilian soybeans were getting premium of about $1.50 a bushel compared with U.S. beans.
“As things get tighter in China on soybean supplies, they will bid up the price and Canada could benefit,” Baize said.
Nonetheless, Canada would likely only be able to fill a small portion of the soybean supplies available from the U.S. market.
“Even if you look at the most optimistic scenario, it is not even close to replacing the U.S. market,” said CIBC’s Tal.
Canada produces less than 8 million tons of soybeans annually, according to Statistics Canada. Last year, Canada’s total exports of soybeans reached around 5 million tons with nearly 40 percent of that amount going to China.
By comparison, the U.S. sold more than 30 million tons of soybeans in 2017 to China, or more than $12 billion worth of the agricultural commodity. The U.S. represented just over one-third of the beans imported by China last year.
Source : CNBC