Trade Clouds Starting to Part, Though Some Uncertainties Remain for U.S. Soy

Apr 28, 2020

By Jim Sutter, USSEC CEO • From Spring 2020 American Soybean Magazine 

As we move into the 2020 growing season, two long-standing truths remain for U.S. Soy. The outlook for the industry remains strong, and the industry will continue to face challenges and uncertainty along the way.

In 2019, we faced an extremely difficult combination of trade wars, adverse weather and Asian swine flu. This year, we are seeing meaningful progress in trade negotiations with China and reasons for optimism that retaliatory tariffs may be less of a concern for the U.S. Soy industry in 2020. But, at the same time COVID-19, commonly called coronavirus, has developed into a new variable that could impact U.S. Soy exports, along with a wide range of other industries across the globe.

The specifics change every year, but U.S. farmers always deal with adversity in some form. Despite that, they always persevere and deliver for our trade partners across the globe. In my daily discussions with U.S. farmers and industry leaders, I have every reason to believe that will continue to be the case in 2020. And in my travels to China and throughout the world this year and last, I’ve seen more than enough interest, enthusiasm and action to confidently say that demand for U.S. Soy remains strong and will continue to grow.

On the trade front, the Phase One trade agreement between the United States and China that was signed earlier this year offers significant potential to provide relief for U.S. farmers who have battled through more than a year of market uncertainty. U.S. soybeans are included in the agreement as part of, “food and agricultural products.” As part of the agreement, importers can apply for tariff-free waivers to import U.S. agricultural products. Understand that these waivers are already being granted and we expect that sales to China will pick up later this year. It’s important to note that we are unlikely to see immediate movement on sales, as China traditionally purchased more soy from Brazil in the spring and the U.S. in the fall, matching up with regional growing seasons.

Our relationship with China is very strong. The Phase One agreement has the potential to be beneficial for both U.S. Soy and our partners in China: U.S. Soy has been investing in China for nearly 40 years to help livestock producers, feed manufacturers, aquaculture producers, and others to improve their efficiencies. That work has been well received, and China’s industries have grown. This deal can continue that track.

That said, additional work is needed to complete a full trade agreement that will allow U.S. farmers to provide their customers with high-quality product that is free from retaliatory tariffs in the years ahead. We will continue to monitor trade developments closely and are hopeful this year’s positive trends will continue.

Serious questions also remain about the impact of coronavirus. As it relates to U.S. Soy, these questions were limited a few short weeks ago to whether the virus would limit China’s ability to purchase the volumes of soy agreed to in the Phase One agreement. Today, these questions are much broader and global in scope, and they of course go far beyond U.S. Soy. As a global community, our first priorities must be to contain the virus as much as possible and to protect the health of people around the world.

In this time of hourly developments and updates, it is impossible to predict the impact of the virus on global markets. That is true for agriculture just as it is for travel, manufacturing, consumer goods and virtually every other industry on the planet.

What we do know is this: People around the world need high-quality protein for food and feed. They need more sustainable solutions for products ranging from tires and asphalt to carpet and plywood. These demands will only grow, and U.S. Soy is positioned to deliver the highest levels of quality, sustainable growing practices and ongoing innovation to help the world overcome adversity and prosper. Even with swirling uncertainties, these facts bolster my confidence for a strong future for U.S. Soy.

Current challenges also demonstrate the importance for U.S. Soy to diversify and build relationships in markets across the globe. The U.S. Soybean Export Council (USSEC) has made great progress in these efforts in recent years, and it will continue to be a focus in 2020. We will stay fervent in our mission to identify and build strong relationships with customers worldwide.

We actively and strategically work to invest in growing markets where there is significant potential for U.S. Soy. This involves identifying factors like growing populations, improving economic conditions, addressing protein deficiency among populations and meeting demands for plant-based oils.

In recent years, we’ve seen growth in the European Union, Middle East/North Africa and Southeast Asia.  We are also working hard in emerging markets such as India, Bangladesh, Pakistan, Nigeria, Algeria and Myanmar.

U.S. farmers are well positioned to reliably serve these markets, even as we see renewed exports to China. We believe one of the smartest ways to drive enhanced value for U.S. Soy is to have a relentless focus on customers by ensuring they understand the “U.S. Soy Advantage.” This is made up of the superior nutritional bundle delivered by a higher concentration of essential amino acids and digestible energy, the verified proof that soybeans are produced sustainably and the high oleic soybean oil that’s heart healthy. Only the U.S. can supply all that.

Farmers are accustomed to overcoming challenges, and 2020 will undoubtedly bring them—some familiar and some new. But with their unparalleled expertise and resilience, they will continue to do their job of providing a sustainable and high-quality product. Those of us at USSEC will continue to do our jobs, as well, working to provide more stability by building demand and expanding global market access for U.S. Soy products. With our ongoing, collaborative efforts, the outlook for U.S. Soy is indeed strong.