The growing trade war between the United States and China is impacting the global grains business. In response to the Trump administration tariffs on Chinese goods, Beijing imposed levies on U.S. agricultural products, including a 25 percent tariff on soybeans, the single most valuable U.S. farm export. U.S. growers sold $12 billion worth of soybeans to China in 2017 alone.
Meanwhile, China, the world’s largest importer of soybeans, has scaled back purchases of U.S. grain to feed their hogs. Instead, China is turning to Brazil. Brazilian soybean exports to China jumped 22 percent by value between January and September, compared to the same period a year ago.
Brazilian producers are not only selling more grain, their soy is fetching $2.83 more per bushel than beans from the United States, up from a premium of just $.060 a year ago, thanks to the stepped up Chinese purchases.
Brazil produces more grain that is needed in their country and it is foreign customers that are responsible for Brazil’s agricultural boon. Nearly 80 percent of Brazil’s soybean exports is now sent to China.
At the same time, prices for U.S. soybeans, recently sunk to decade lows that farmers say are below the cost of production. That slump has made the ag sector a drag on an otherwise relatively healthy U.S. economy. The Trump administration said in July it would spend up to $12 billion in taxpayer funds to help U.S. farmers offset trade-related losses.
Despite the impact to U.S. farmers, most are standing by President Trump, believing he will eventually negotiate a better trade deal with China, whose appetite for soybeans is so vast that it cannot completely wean itself totally off U.S. grain.
However, for the time being, many people opposed to Trump’s actions in the trade war with China, believe trade policies are handing precious market share, money and momentum to Brazil, the United States’ most formidable agricultural competitor. Some fear the lost ground will be hard to reclaim.
