US/Chinese Trade Dispute Threatens Soybean Business
The last thing a shaky looking soybean market needs right now is trade dispute between the US and China, but that's exactly what's brewing.
The Obama honeymoon period is over, and last week his administration slapped a 35% import duty on tyres from China, saying that cheap imports were putting US workers out of jobs.
China didn't take long to retaliate, yesterday announcing it was looking into the dumping of US poultry products onto it's own domestic market.
The threat of the dispute spilling over into soybeans will be a concern for the US market just before the biggest US soybean harvest in history kicks off in earnest.
China is too important a market at the moment, regularly accounting for 50-66% of the USDA's weekly export sales. Last week China booked just shy of 400,000 MT of the 830,600 MT sold, and 'unknown destinations' - a frequent euphemism for China - took a further 145,000 MT.
Of course it could be argued that China needs US beans right now, with very little left for sale in South America until their harvests kick off in the spring. They are however well stocked with government-owned supplies and just beginning to harvest their own crop as well.
US And Mexico In Protectionism Row
President Barack Obama's administration is facing it's first trade dispute as a row over protectionism erupts with neighbouring Mexico.
The dispute centres around US Congress last week cancelling a funding program that allows Mexican trucks full access to all the major American highways in an effort to protect US jobs.
After years of disputes between Mexican and US truckers, the Bush administration finally began to allow Mexican lorries free access to US highways in 2007.
Last week's move has effectively put a stop to that, in breach of the North American Free Trade Agreement (NAFTA), say the Mexicans.
The NAFTA was signed by the US, Mexico and Canada in 1992, initially allowing Mexican trucks access to border areas only where their cargo had to be discharged and redistributed using US transport.
That all changed under George W Bush, despite fierce opposition from US truckers unions and environmentalists. It seems that all bets are now off under the Obama administration. He'd like to re-write the agreement, a move that Mexico are likely to strongly resist, especially in the current economic climate.
In retaliation at last week's move Mexico has said that it will slap import tariffs on US agricultural & industrial goods, without quantifying exactly which goods it is referring to.
It is thought unlikely that they mean staple Mexican foods such as corn or wheat however.
US poultry firm to cut production
In response to continued increases in feed ingredient cost, effective immediately Cagle's Inc. is reducing its chicken production by 4%.
The reduction will affect the number of birds processed at the company's location in Pine Mountain Valley, Georgia (one of two slaughter plants Cagle's operates in the southeast supplying product throughout the United States and internationally). No layoffs are planned as a result of the decrease in production.
According to Doug Cagle, President and CEO, "Current chicken prices have failed to reflect the tremendous increase in the cost of feed. Ingredient prices, mostly corn and soybean meal, have increased over 80 percent in the last two years raising the cost to produce chicken by more than $.17 a pound. These are unprecedented times and given current USDA forecasts it appears that high feed costs are here for the foreseeable future. The cutback in production will not affect our customers with existing commitments but will reduce product being sold through less profitable commodity outlets."
Pilgrim's Pride baling out
According to local reports, Pilgrim's Pride may close its facilities in El Dorado, Arkansas, if it does not see improvement in quality and a return on its investment.
The El Dorado site includes a poultry processing plant, a feed mill and a hatchery. The site employs over 1,600 people. "This is an extremely serious situation in El Dorado. We don't want to close that complex, but unless there are immediate changes that will be our only option," Pilgrim's Pride spokesman Ray Atkinson told the local press.
The news comes only a month after Pilgrim's Pride announced it would close a processing plant in North Carolina as well as 6 of its 12 distribution centres “in response to the crisis facing the U.S. chicken industry from soaring feed-ingredient costs resulting from corn-based ethanol production”.
The company also said it would review its other operations and would consider more closures. The assessment at El Dorado is part of that review, Atkinson said.Pilgrim's Pride acquired the El Dorado plant in 2003 from ConAgra.
Also last month, Pilgrim's Pride announced the sale of its turkey production facility and distribution centre in New Oxford, Pennsylvania, to New Oxford Foods, LLC, a subsidiary of Hain Pure Protein Corp.
US distillers grains production exploding - where will it all go?
If the tail sometimes wags the dog, what are the implications for the US beef industry as mountains of distillers’ dried grains are produced in the US? Do ethanol refineries attract feedlots? Do beef rations undergo a renovation? Will cattle production change as a result of the availability of a new feed? What does the crystal ball have in store for the cowboy?
Ethanol refinery capacity in the US increases daily and high oil prices will allow it to reach the maximum of 15 billion gallons per year from corn before the 2012 target date. But for every bushel of corn converted into ethanol, there are 17 pounds of distillers’ dried grains (DDGS) that are also produced, and this perishable product has to find a home. The Center for Agricultural and Rural Development (CARD) at Iowa State forecasts 40 million metric tons of DDGS will be produced by 2011, and possibly 88 million metric tons by 2016. The CARD analysis looks at future use of DDGS, its implications for the livestock industry, and the impact of surpluses of DDGS to the ethanol industry.
Full story: here
