Trade fight is on, threatening US agriculture

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combining soybeans, farm, USDA, grain markets
Farm and Dairy file photo

SALEM, Ohio — The much anticipated trade fight with China has officially begun — with tariffs taking effect July 6 on $34 billion worth of Chinese goods — and China retaliating by the same proportion, on imports that include U.S. soybeans and meat.

Each country is slapping the other with a 25 percent tariff on select imports, and China is calling it “the biggest trade war in economic history.”

The impact to Midwest agriculture could be substantial. As of July 6, new crop soybean prices at area mills were around $8 per bushel — a decrease of about 50 cents per bushel.

During a news conference with reporters July 3, Purdue University experts said U.S. soybeans will face a $3 per bushel import tariff, which will encourage China to look elsewhere for most of its supply.

“China is going to buy all the beans they can from non U.S. sources first,” said Chris Hurt, ag economics professor at Purdue.

Because China uses so much soybeans, the country will ultimately have to import some from the U.S., Hurt said, but our beans will be a last resort.

“They’re (China) going to buy the minimum they can from us and that’s the residual supplier that we become,” he said.

By the numbers

U.S. soybean sales to China in 2017 amounted to $12.356 billion, or 27 percent U.S. production. Corn supplied to China stood at $148 million, or about .02 percent; and $1.08 billion in pork, or 2 percent.

If China sources its soybeans from other countries, as anticipated, the big question will be for how long, and whether other nations will surpass the U.S. in production.

Domestically, the tariffs are taking a significant toll on soybean prices, with new crop 2018 prices falling to $8 a bushel. And, lower soybean prices could cause farmers to rethink planting soybeans in the future.

“The era of soybeans being more profitable than corn may be over,” said Michael Langemeier, Purdue ag economist.

Top customer

The American Soybean Association says the tariffs are hurting farms across the country, because China is the top market for U.S. soybeans, importing nearly a third of the U.S. crop in 2017.

“It is imperative that we maintain the robust market we have worked so hard for decades to establish with China,” said ASA President John Heisdorffer, a soybean producer from Iowa. “They (China) have a sizeable feed industry that’s dependent on soybeans, the largest swine herd in the world, the largest global aquaculture industry, and are rapidly modernizing their poultry, egg, dairy, and beef industries. They are a vital trading partner, and we need to continue to do business with China without the sting of these tariffs.”

Around the world

The U.S. is facing tariffs from other countries as well.

American Farm Bureau trade specialist Dave Salmonsen said Canada is focusing its retaliation mostly on metals, but isn’t leaving ag products untouched. Pizza, yogurt, chocolate, orange juice, beer and whiskey are all being affected as part of Canada’s 25 percent retaliatory tariffs.

The European Union is also retaliating for the same reason, and for ag products, they’ve included rice and cranberries, peanut butter, kidney beans, and also whiskey.

In June, Mexico put 10 percent tariffs on U.S. pork, cheese, apples and whiskey. Mexico is expected to increase the tariffs to 20 percent this month.

The Donald Trump administration has argued the tariffs were necessary to even the playing field with other countries, and to prevent unfair trade practices. He has also argued that China was stealing U.S. intellectual property under previous trade agreements, which he has declined to reauthorize.

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3 COMMENTS

  1. I’m not sure how tariffs work. What would prevent other countries from buying our soybeans and then selling them to China? Would this avoid the 25 percent tax? If not, then taking another viewpoint, how much of the world soybean production (supply) comes from the USA? I’m not sure when other countries plant soybeans, but they would need to be in the ground to be harvested in the fall. Growing crops are not as easy to move to another country since fertile soil and the right climate conditions are necessary. China may find themselves looking for a substitute or passing the cost on to whatever products they make with the soybeans. A long time ago, I had a summer job in a soybean plant that made products. If the USA responded with tariffs on those products from China, then perhaps we may create more jobs in the USA. Does China have a tariff on those products (e.g. lecithin) too? My thinking is that these tariffs may change as we move forward and the impact on both sides is realized.

  2. Well, Chris, I don’t find fault with your article, other than this –
    our trade deficits are an economic disaster. They must be fixed.
    Why this was allowed in the first place, I have no idea.

    We are about 21 trillion in debt. This problem has existed for decades ?
    Why IS there a trade war, when we are just trying to make it fairer for our country?
    I believe the answer is, because they want to keep the giant advantage, that’s why.

    If it hurts farmers, it won’t be for long. This is posturing in negotiations.

    https://www.thebalance.com/trade-deficit-by-county-3306264

    China – $636 billion traded with a $375 billion deficit.
    Canada – $582 billion traded with an $18 billion deficit.
    Mexico – $557 billion traded with a $71 billion deficit.
    Japan – $204 billion traded with a $69 billion deficit.
    Germany – $171 billion traded with a $65 billion deficit.

    Our farm is in Uniontown, OH and I gave up soybeans and corn over the stupid roundup required,
    and not having a combine. We only have about ten acres, so I’m looking at sunflowers…

    • If you want to understand the importance of the steel industry take a look at the Civil War. The South was a predominantly agricultural economy. During the war they lacked the industry to produce other items needed for their continued survival which was one reason they lost. Without robust manufacturing in the USA we could end up like the South and at a disadvantage in a tight. We can’t allow our steel industry to fail. Some of these other nations have the government underwriting their industries in order to make our industry fail. It’s time and past for our Nation to take care of its own. We have had our wealth given out to other countries for far too long. “This too shall pass” and when it does we will all be better off than we are now

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