China-US trade war is making American soybean farmers anxious

When China tentatively agreed last month to increase its imports of US goods, American soybean farmers sighed with relief. They had been holding their breath since April when Beijing, in response to the Trump administration’s tariffs on steel and aluminium in March, first proposed retaliatory duties on industrial and agricultural products, including soybeans. The threat caused the price of US soybeans initially to plunge, and they have continued on a slower, but still downward trend in the past several weeks. “I was very optimistic. I thought ‘good deal. Maybe they’re getting some things worked out’,” said Lindsay Greiner, a soybean farmer from southeast Iowa in the heart of the American Midwest. The hope was short-lived, however, as trade talks stalled. US President Donald Trump threatened to follow through with new tariffs last week, and a visit to Beijing by Commerce Secretary Wilbur Ross ended without clear results. Beijing warns Washington: all trade promises are off if US imposes tariffs Nonetheless, China’s commerce ministry on Thursday pledged to uphold an agreement made in Washington in May to increase its imports of goods from the US, although it said that no concrete arrangements had been made. “There’s a lot of volatility in the market – one week you get good news and the next you get bad, and that makes the markets go up and down. That makes farmers anxious,” Greiner, the incoming president of the Iowa Soybean Association (ISA), said. Soybean buy buoys Chinese imports as Beijing tries to stave off trade war with US Soybean farmers anxious about what’s ahead need look no further than their peers in the pork business, who have seen major hits to their bottom line as a result of tariffs from China, and, more recently, Mexico. Pork prices began falling in March when the first rumours of tariffs, which took effect in April, began to affect markets, causing prices to drop by as much as US$18 a head by late May. “Not all lost value can be attributed to China, but it is certainly the main factor,” Jim Monroe, spokesman for the National Pork Producers Council. The US pork industry is increasingly dependent on exports, with a mature market at home and growing demand for protein abroad in developing countries like China. There are more than 500,000 jobs in the industry, about 110,000 directly tied to exports, according to the council. For hog farmers, “the losses have turned a break-even year into one where they will lose US$10 to US$15 per head”, said Dermot Hayes, a professor of economics at Iowa State University. Hayes estimated total losses of between US$1.5 billion and US$2 billion for the year, calculated from March when speculation of Chinese retaliation began to affect pork futures. Meet the Chinese farmers delighted by the prospect of a US trade war Data from the American Farm Bureau Federation show China’s tariffs on pork have been effective. US exports fell significantly since the tariffs were announced, at a time when exports should be reaching their annual peak, according to data from the past two years. But the US makes up a relatively small part of China’s imported pork, which comes primarily from countries like Germany and Spain. Pork producers were hit with another round of tariffs that came into effect on Tuesday, this time from Mexico, in retaliation for the US applying tariffs on its steel and aluminium products, along with those from Canada and the EU. Commerce secretary Ross insisted that the tariffs against allies were needed to properly target China and to stop its metals from coming into the US through third countries, the Financial Times reported. While only the threat of tariffs looms over soybeans, the effects of sustained uncertainty have already affected farmers, their communities and even their plans for the future. Donald Trump is alienating allies the US needs to confront China on trade, panel warns “If things turn out negatively for us, then we won’t be able to bring our two sons into the operation, which is something we’ve been working towards for years now,” said Dave Walton, a soybean farmer from Iowa. Farmers said they factored in seasonal challenges, like too little rain or too much sun, as part of the job. But becoming pawns in international trade negotiations? The pricing uncertainty comes as US farmers are already fighting a long-term slump in commodity prices. The market volatility has forced them to be more conservative in their business decisions, with already tight bottom lines tightening further. “We’ve seen declines in the sale of new equipment,” ISA spokesman Aaron Putze said. “Used equipment sales are strong as farmers look to do more with less.” US investors ‘wary’ of China deals amid trade war threat Declines in export-related industries like soybeans have consequences for the rest of the local economy, too. According to the Iowa Economic Development Authority, about 8 per cent of jobs in the state – about 140,000 – are supported by exports, with 21,606 jobs in agriculture alone. “This thing has bigger tentacles than most people realise – if you affect the agriculture economy in Iowa, you affect the entire economy in Iowa,” Walton said. “Anything that affects us affects money that we have to spend in the community – at the equipment dealership, car dealership and the grocery store and the restaurants.” Farmers have been lobbying hard with the US government to take food off the trade war table. “Our message is being delivered to Washington to legislators, regulators and anyone who will listen: We don’t want to see our markets used as a bargaining chip,” Greiner said. Iowa’s farmers have a long-standing relationship with buyers in China, which is the world’s largest market for soybeans and relies on imports for around 90 per cent of its soybean needs. “It’s been nearly 30 years now that Iowa and US soybean farmers have been travelling to China and developing the market,” Putze said. Is it time Beijing ditched ‘Made in China 2025’ and stopped upsetting the rest of the world? Iowa farmers alone grow more soybeans than China produces domestically, and its farmers have worked hard to foster their relationship. When ISA representatives travelled to Beijing in March, Chinese buyers told them that because of increasing demand, they hoped to increase imports of soybeans by 2-3 million tonnes annually over the next two to three years, a large portion of which would come from the US. But when the trade war with the US began, China found that soybeans were an easy candidate for retaliation. China softens tone on trade stance after US reversal on ZTE ban China imports about a third of US soybean production, and had several other markets from which to draw. Notably, a bumper crop in Brazil made it easy to shift suppliers. “The possibility of sourcing more soy imports from Brazil after their bumper harvest gave China an ace in the hole,” Tristan Kenderdine, research director at the consulting firm Future Risk, said. “China hold all the cards this season because of that crop, so they have no problem choosing suppliers.” In the future, China, the destination of 60 per cent of the global soy trade, will have to be more strategic to secure supplies of soybeans and avoid volatility. “China wants to develop agroindustrial capacity in Russia, Kazakhstan and Ukraine to ensure supply without having to rely on Pacific partners,” Kenderdine said. “But midterm, they probably wouldn’t have been able to call Trump’s bluff on this without such a good crop from Brazil,” he said. Regardless of how this trade conflict resolves, analysts said US farmers should prepare to share the China market with other nations. “At the end of the day it is not in China’s interest to expand agricultural trade with the US exclusively,” Even Rogers Pay of China Policy, a Beijing-based consulting group, said. “It would leave China more dependent on a single, powerful trade partner for a necessity: food.” Ignore the White House rhetoric. Here are five ways China is winning Trump’s trade war US farmers know that the Trump administration is in the middle of a broader attempt to address long-standing trade disputes with China, from the trade imbalance to tougher issues like intellectual property. “A lot of farmers recognise that there are other trade issues that need to be resolved,” Greiner said. “My message to those in power would be let’s sit down at the table, find the problems and fix them.” Echoing analysts and producers across the economy, from automobiles to pharmaceuticals to electronics, Greiner said: “When you boil it down, you’ve got the two largest economies in the world and there is no one that will benefit from a trade war.”

China-US trade war is making American soybean farmers anxious

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}With the threat of tariffs still looming, farmers know China can go elsewhere for its grain supplies

With the threat of tariffs still looming, farmers know China can go elsewhere for its grain supplies