30.09.2018 (Nikkei Asian Review) - TOKYO -- The U.S.-China trade war is dramatically changing the global flow of soybeans, along with prices of the legumes.

American soybean export contracts with China have sharply decreased since July, affected by the countries' tit-for-tat tariffs. On the other hand, U.S. exports to the European Union, other Asian countries and Oceania have increased significantly.

Prices of U.S. products have hit the lowest levels in about a decade, while Brazilian prices have surged as Chinese buyers shifted from the U.S. to the South American country. And since soybean meal is used in pig feed, this is pushing up pork prices, fueling concerns about Chinese inflation.

Every year, China ships in over 100 million tons of soybeans, or 60% of the global total. The country has been the biggest buyer of U.S. soybeans, procuring 60% of them. But Beijing imposed an additional import duty of 25% on American soybeans in retaliation for Washington's tariffs, and the impact is starting to show in statistics.

Weekly farm export figures from the U.S. Department of Agriculture show that sales to China totaled about 130,000 tons in August, one-tenth the level a year earlier.

In contrast, exports to EU countries jumped about 190% to roughly 1.08 million tons. The shipment volume to the rest of Asia and Oceania grew 60% to around 1.56 million tons. So for August, total U.S. soybean exports actually increased 16%, to about 3.84 million tons.

At a glance, this would suggest the U.S. has successfully found other places to sell its output. But total exports for the crop year that ended in August were still down 3% on the year, at 56.4 million tons.

The year's exports to China dropped 23%, to 27.7 million tons.

"The U.S. has not been able to make up for the declines in exports to China," said Hideki Hattori, general manager at Tokyo's Food Management Support, a subsidiary of trading house Itochu.

Recent benchmark prices in Chicago declined to a little over $8 per bushel, due to the export pressures coupled with forecasts of a bumper crop in the U.S.

To protect U.S. farmers' incomes, the government is trying to push shipments from northwestern ports -- a large portion of which used to go to China -- toward Japan, South Korea and Taiwan.

The sharp drop in exports to China has led to a reduction in surcharges on spot transactions for northwestern shipments, added to Chicago price levels. The surcharges are down to about 30 cents per bushel in September, from about $1 in March.

Mitsuyuki Nishimura, Japan director of the U.S. Soybean Export Council, said he has orders from council headquarters to remind Japanese oil makers that soybeans shipped from the northwest are cheaper than those transported from the Gulf of Mexico.

Meanwhile, China's shift toward Brazil has triggered competition with European importers, resulting in the higher prices there. The surcharge on Brazilian soybeans rose threefold from a year ago to around $2.7 per bushel in mid-July, according to Sumitomo Corporation Global Research.

But China will not be able to satisfy its 100 million-plus tons of demand without the U.S., said Naoyuki Omoto, head of Green County, a Tokyo-based grain consultancy. "Eventually, China will have no choice but to buy at least a certain amount of U.S. soybeans that carry high tariffs," he said.

Higher soybean costs are a worry for Beijing, given the knock-on effects on pork prices. The meat holds significant weight in the country's consumer price index.

Higher Brazilian prices also hurt Japanese foodmakers that import soybeans for tofu production.