Soybeans are the largest and most concentrated segment of global agricultural trade and account for 18% of total U.S. crop receipts, second only to corn (25% of crop receipts). As a result, factors that impact soybean sales can ultimately have a profound effect on farm machinery sales, one way or another.

In March 2018, China proposed a 25% tariff on U.S. soybeans and implemented the tariffs in July 2018. In the first half of the Chinese marketing year for soybeans (October 2018–March 2019), Chinese imports of U.S. soybeans fell by nearly 22 million metric tons, down 89% relative to the same period in 2017-18.

To offset the decline in U.S. soybean imports, China increased imports from Brazil and, to a lesser extent, Canada. China’s 11.5 million metric ton increase in imports of soybeans from Brazil was large enough to offset roughly half of the lost imports from the U.S. Additionally, China increased its imports from Canada by 1.7 million metric tons. In total, however, increased shipments from Brazil and Canada did not offset the decline in imports of U.S. soybeans. China’s soybean imports were nearly 9 million metric tons (20%) lower in October 2018 to March 2019 than the same period in 2017-18. 

Soybean Trade With 3 Main Players 

Geographic concentration of soybean importers and exporters is a distinguishing feature of the global soybean market. During 2016-17, the U.S. and Brazil together accounted for 83% of world soybean exports. The U.S. exported 59 mmt of soybeans and Brazil exported 63 mmt, while Argentina was the third leading exporter with 6.9 mmt.

China was the destination for 61% of U.S. soybean exports and 77% of Brazil’s that year. U.S. and Brazilian exports to China accounted for two-thirds of all soybean trade during 2016-17. U.S. soybeans were also exported to other Asian countries (19%), the European Union (8%) and Mexico (7%). Brazil’s exports to other Asian countries accounted for 11% of its exports and sales to the European Union accounted for 8%.

Relief for Ag Equipment Industry

The recent meeting between Presidents Donald Trump and Xi Jinping where they agreed to resume trade talks on the condition that the U.S. would not impose additional tariffs on Chinese imports. Some industry observers see this as a potential boon to the ag equipment industry.

In a July 2 note, said, this is welcome news for the [manufacturers and dealers in the] industry which had been witnessing a downtrend for the past few years due to low commodity prices and sluggish farm incomes which adversely impacted spending on farm equipment. “While tariffs imposed by the Trump administration on steel and aluminum hurt manufacturers by inflating raw material costs, China's retaliation with tariffs on U.S. food and agricultural exports equally hit the industry hard, given that China is the largest export market for U.S. agriculture producers. High tariffs disrupted normal marketing patterns, flaring up costs by forcing producers to find new markets for clearing the surplus stock. Moreover, stringent and cumbersome entry procedures affected the quality and marketability of perishable crops, escalating marketing costs for producers.”

In addition, President Trump had authorized the USDA to provide a $16 billion aid for American farmers who have been affected by the trade war. And USDA plans to spend $1.4 billion to purchase surplus commodities that would be used in food banks, pantries and school meal programs.

Wet and cool weather delayed the planting season in most productive farming regions in the United States, which affected crop supply while demand remains high. This imbalance will support prices, which bodes well for farmers.

According to, the USDA's latest available projections show, following a decline of 16% in 2018, net farm is anticipated to increase 10% year-over-year in 2019. Improving farm income will enable farmers to invest in equipment purchases.

The improving fortune for U.S. agriculture is also showing up in the company share prices. reports the Manufacturing – Farm Equipment industry has collectively gone up 15.1% over the past month, outperforming the S&P 500's gain of 7.2% and Industrial Products Sector's rise of 9.2%.