SOUTH AFRICA – Following China’s response tariffs on US goods including soya beans, there could be possibility of price shocks on the commodity, but an agricultural economist, Wandile Sihlobo has said that this should be cushioned by the ability to substitute yellow maize in feed stock.
An article in the Business Day reported that despite of the disruption in the global soya bean market, the outlook for South African consumers remains positive.
It indicated that the tariff war was also unlikely to derail rapidly growing local production in the near to medium term.
US imposed 25% tariff on US$34bn worth of Chinese goods effective July 6.
China has retaliated by imposing a similar 25% tariff on 545 US products, also worth a total of $34bn, soya bean, alcohol and tobacco included.
Since May, soya bean prices which are set globally are said to have dropped and reached a 10-year low this month but analysts say the rising protectionism may lead to higher prices in the long term.
A 25% duty on US soybeans could be a well targeted area by China as S exported US$14 billion worth of the commodity to China, last year alone.
As US soy producers seek new markets, global supply could be disrupted with effects such as decline in prices and low income for farmers.
SA soybean production on the rise
Soybean production grew by 63% between the 2011/2012 to 2014/2015 production seasons, while the area planted increased by 57%, according to Grain SA.
The key underlying factor behind this growth was the demand from the crushing plants which saw increases in the crushing capacity of approximately 2,2 million tons plus as a result of sectorial investments
Investment towards soybean crushing capacity was aimed at stimulating domestic soybean production, as part of import substitution strategy.
South Africa’s 2016/2017 soybean imports were estimated to be at the highest levels in years due to expected significant drop in domestic production but imports of soybean oilcake are on a decreasing trend.
Moreover, the country remains the largest importer of soybean oilcake in Sub-Saharan Africa, accounting for an average of 72% of import demand.
China is the largest consumer of soya beans, while the trade war has primarily benefited Brazil, which is now receiving a price premium on its exports to China.
According to Sihlobo, soya beans competed with yellow maize as both an input and in terms of agricultural land, which should help alleviate some of the effect of global supply disruptions.