WASHINGTON, Feb. 25, 2015 – There’s concern that China’s appetite for U.S. soybeans may be based on more than just a need for food and animal feed. Some importers apparently are using U.S. soybeans as a way to get access to credit that they can use to then make loans, says Fred Gale, an economist at USDA’s Economic Research Service (ERS).
The industry’s concern is that a government crackdown on the practice would reduce imports of U.S. soybeans. “We’re hearing rumors that this practice is coming to an end and that it’s going to affect soybean demand,” said Gale, speaking last week at USDA’s Agricultural Outlook Forum.
“It’s very murky situation that nobody really understands” and there’s no solid information to evaluate how prevalent the practice is, he added. Gale didn’t want to speculate as to how much of the market may be involved in the lending practice, but in response a question, he said 1 million to 2 million tons was plausible.
It’s hard to overstate the importance of China to the soybean market. The U.S. provides 36 percent of the soybeans and other oilseeds that China buys from abroad and 24 percent of its total agricultural imports, according to ERS.
Demand for American soybeans in China is expected to remain strong for the rest of fiscal 2015. But ERS has lowered its forecast for total U.S. agricultural exports to China this year by $400 million to $23.6 billion, largely because of softer demand for hides and skins as well as pork, poultry and dairy products. Sorghum exports also are strong; China has been substituting sorghum for U.S. corn, said Gale.
Total U.S. agricultural exports globally for fiscal 2015 are forecast at $141.5 billion, $2 billion below what ERS projected in November.
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