Trade War Fallout Shifts Soybean Markets
U.S. corn and soybean farmers were hoping to make up for lost time with a late planting season, due to this spring’s floods. The last thing they need is for the ongoing tariff war with China to escalate.
On August 2, President Donald Trump threatened by tweet to impose tariffs of 10 percent on $300 billion worth of Chinese goods that had so far been left alone—including shoes, clothing, and electronic goods. If put in place, the new tariffs would cover virtually everything the Chinese sell us. The U.S. has already levied additional tariffs of 25 percent on $250 billion worth of Chinese goods.
The barge industry is another victim of the dispute. According to USDA figures, while soy barge movements are at 89 percent of last year’s movements, corn movements by barge are only at 53 percent of last year’s.
As the trade talks have sputtered on, China has promised several times to buy American agricultural products as a good-will gesture. It’s not clear how many of those good-will purchases happened, and Trump has complained that the Chinese have not followed through.
This time, in response to Trump’s latest threats, China said it would suspend all imports of U.S. agricultural goods. Zippy Duvall, president of the American Farm Bureau Federation, described that news as a “body blow” to already-struggling American farmers. The tariff news caused a spike in the price of Brazilian soybeans, also helped by a weakening of Brazil’s currency.
A shift to Brazilian beans could have consequences no one wants. An August 1 article in The Economist magazine, titled “Death Watch for the Amazon,” detailed how the Amazon rainforest is again under attack, losing the equivalent of two Manhattans’ worth of land each year by one estimate. Soybean farming and cattle ranching are the two main activities for which rainforest is cleared.
Between 2004 and 2012, efforts by Brazil to slow deforestation were effective. Part of the reason was a sustained campaign by Brazil’s agricultural customers (including U.S. and other Western food companies, urged by consumers) not to buy beef or beans grown on recently reclaimed land. During that time, according to The Economist, Brazil’s output of both products rose, showing that deforestation is not necessary for it to increase its output. Since 2013, however, Brazil has both weakened deforestation-prevention efforts and granted amnesty to landowners for past deforestation.
American export marketing councils have managed to shift some U.S. grain to Europe: 7.4 million metric tons of soybeans went to Europe so far this year compared to 4.5 million a year ago, said Steenhoek.
According to the U.S. Soybean Export Council, in the 2018–2019 marketing year, China imported 9.575 million metric tons of U.S. soybeans—a decrease of 17.91 million metric tons compared to the previous marketing year. Europe can’t replace all of those lost 8 million tons. But European consumers care about Brazil’s rainforests, so U.S. grains could do better there over the long term. It’s a chance to highlight the more sustainable practices of American farmers.