Iran was Top U.S. Soybean Buyer in August
Agfax reports Iran was Top U.S. Soybean Buyer in August
Thanks to Friday’s data from the U.S. Census Bureau, we now know that U.S. soybean exports were up again in August, to 123.7 mb in 2018 from 109.9 mb a year ago. If you thought it was odd that Egypt was the number one buyer of soybeans in July, you might want to sit down. The top buyer of U.S. soybeans in August 2018 was Iran.
Yes, the same Iran that President Donald Trump tweeted to in July in all caps, “NEVER, EVER THREATEN THE UNITED STATES AGAIN OR…” The same Iran that was hit with U.S. sanctions on August 6 and faces more in November. The same Iran that hadn’t imported soybeans from the U.S. all year until July. That same Iran stepped up in August and took 15.2 mb of U.S. soybeans, more than it has imported from the U.S. in the past five years combined. What gives?
When July’s data was revealed a month ago, many of us wondered if some of the increased exports were finding alternative routes to China. When I asked people who might know, the general consensus was that some U.S. soybeans may have found their way to China via Canada, and some exported to Argentina will end up in China, but a credible source explained to me that it would be difficult to fake shipping certificates that document the origin of where the soybeans came from.
I am no expert in forging certificates, but knowing a little something about human nature, we have to acknowledge the rich incentive to avoid a $2.18 a bushel tariff on U.S. soybeans with an FOB price of $8.72 in New Orleans. Which brings us back to the question, what gives with Iran?
China is a buyer of roughly one-fourth of Iran’s crude oil and is not interested in complying with the U.S. sanctions. Is it possible Iran is sweetening the pot for China to keep buying oil by also throwing U.S. soybeans in the deal? Yes, it sounds crazy, and not even Jack Ryan can prove this one, but is that the explanation for Iran’s sudden appetite for U.S. soybeans?
Again, I am not interested in spreading rumors — the world has enough of those and, as I said earlier, the evidence is lacking. But, as far as U.S. soybean demand is concerned, I must point out for the second month in a row that the market has found ways to make up for the loss of China’s direct participation.
No Conspiracy Theory Needed
The Financial Times reports US Farmers Turn to Iran to Plug Hole in Soyabean Sales.
Here’s my favorite line:
“We buy our commodity from a cheaper producer, no matter if it’s the US or another country. It has nothing to do to politics,” said Akbar Sebghati, secretary of the Iranian Oilseed Extraction Industry Association.
That one line tell you most of what you need to know.
Here’s the rest: Soybeans are exempt from Trump sanctions on Iran for “humanitarian” reasons. So, off they go.
Excuse me, did I say “humanitarian”? Why, yes I did, but it’s not what I meant.
Trump does not give a rat’s ass about humanitarian causes. If it was primarily Germany that wanted to aid Iran on the same excuse, the answer would have been “no”.
How do we know this? Look at US embargoes and sanctions on Venezuela. Look at US policy in Yemen.
Trump is worried about a farm-led revolt, no more, no less.
Iran the Beneficiary
Ironically, at least in terms of soybeans, Iran is the big winner, US farmers are the big loser. Prices are down because Iran cannot cover for all of the loss in exports to China.
Iran gets soybeans on the cheap and US farmers lose.
Well done Mr. President, Not
Meanwhile, please consider the Tariff Scorecard: 57 Companies Bitch About Trump’s Tariffs, 7 Give Positive View.
Mike “Mish” Shedlock
Good points. It is a very complicated issue.
Markets work by themselves, governments can only interfere and change the pricing.
It is obvious China is sourcing soybeans from US through Iran and other countries.
China’s tariffs on soybeans were total Chinese face saving idiocy.
If the cost of food rises in China there will be serious internal problems for Chinese Communist Party.
It is clear market pricing for soybeans went too low on the mistaken belief China would stop or that China could stop buying US soybeans.
Now when it is clear US is exporting MORE soybeans currently in 2018 than in the same time frame in 2017 the soybean prices should rise back up and benefit US farmers.
Russia did a similar thing regarding putting sanctions on food products in response to sanctions US and EU put on Russia in response to the situation in Crimea and war between Russian speaking parts of Ukraine and Ukrainian government.
In reality Russia is turning a blind eye to food smuggling from EU countries to Russia through the borders and through Belarus and other countries in Russia’s sphere of influence as conduits.
By putting tariffs on soybeans China tried to influence the mid-term elections in USA by hurting Republicans and Trump in states with large farming sectors…
I agree and great post.
China can buy from Canada and Brazil, but the sanctions have distorted the price enough, that no one makes money now on soybeans without selling lots of volume. I was sure that the USA soybeans would go somewhere. Savior the irony.
Here is a comment on Brazil.
Brazil will probably have a tough time filling all of China’s needs. Fortunately, there is more Amazon forest to plow into soy fields.
Iran buying them cheap and stacking them deep. Profitable middleman situation. Making IRAN Great Again.
This sounds like half a story. So China has stopped buying soy beans from the US — what is the rest of the story? Is China buying soy beans from someone else — and at what price? Are Chinese people having to live without soy beans? Bottom line — Is the Chinese government feeling some pain?
Mish is absolutely right that markets (human ingenuity) will usually find a way. Just look at the failure of western governments to stop the trade in illegal drugs. On the other hand, look at the general failure of markets in the US to provide media which deliver anything other than Far Left propaganda. It is a complicated world.
The new business:
Smuggling soybeans to China.
China buys them from Iran. Previously, they bought them from the US. And Iranians grew their own. Now Iranians sell theirs to China, and replenish that which they thus sold, by buying from the US.
Same number of soybeans grown. Same number consumed. In all countries. Just some additional frictional drag, in the form of shipping, lobbying, forging, special permits etc…. thrown into the mix. Enriching leeching, connected middle men, at the expense of those poorer and less connected, who just want some soybeans so they don’t have to go hungry.
Wait, when did we ever try to stop illicit drug trade? We aren’t overseeing poppy plantations in Afghanistan because we hate drugs, nor are we handing out opioid prescriptions like candy thinking people won’t graduate to street opioids. Lotta money to be made in drugs, all the way down to law enforcement, the courts, and our massive incarceration industry.
No. The real losers are Irainian farmers. They will be bankrupt and crushed.
Kinda like US manufacturing for the last 20 years until DJT.
And when the US pulls away the cheap food punchbowl – guess what happens?
Hint: It takes years or even a generation to build an efficient farm that can feed the locals.
But…but…we had some cheaper food for awhile…
Arab spring was caused by large increases in food prices worldwide which led to many Arab countries having large populations that could no longer afford to buy enough food to eat.
It took 8 years to go from nowhere to a man on the moon…..
I’m not trying to belittle Iranian farmers, but if need be, they’ll get some crops growing before they get to the moon…..
More generally, the way competition works, is that 2nd place is always within a whisker of 1st. So if 1st “pulls away the cheap punchbowl,” alternative number two is 99% as good.
The fear mongering is no different than all other hobgoblins. Which are all imaginary.