U.S. trade disputes depress soybean, ag markets

By John Butters, The JOURNAL


A recent decision by U.S. and Chinese trade officials to resume low-level trade negotiations is providing hope for farmers that a deal between the countries is in the works.

After all, a soybean trade war involving the United States and China makes little sense for either country.

China imports roughly 100 million tons of soybeans each year, primarily from Brazil and the United States, which together produce 70 percent of the global supply. The largest international destination for U.S. soybeans, it imported more than 27 million tons of U.S. soybeans in 2017, 30 percent of all U.S. soybean production.

While American farmers would have difficulty replacing a customer as large as China, experts say it is equally unlikely that China can replace its current imports from the U.S. with another supplier. The situation is in fact a standoff between two on the world?s largest economies.

Larry Marek, a Riverside farmer and a director on the United Soybean Board, visited China with the board in May of this year. He has deep concerns about the trajectory of the trade talks.

?The Chinese attitude toward the American soybean product is very good. They like our product and they had plans to buy more. At that time, our trade negotiators were cautiously optimistic. But the latest round of tariffs on Chinese goods has changed that. Orders have been canceled,? he said.

Marek said the so-called experts should not assume that China would be unable to replace U.S. supplies of soybeans. Brazil presents a growing threat to the dominance of American agricultural exports.

?The Chinese already import 70 percent of their soy needs from Brazil. The U.S. supplies about 30 percent. Brazil has plans to increase its soybean acreage. Brazil has 200 million acres of land suitable for cultivation,? he said.

The great danger, he said, is that a weak export market will cause this year?s crop to carry over into next season. That would dramatically increase the supply and cause crop prices to plummet.

As an early warning sign, Marek said soybean prices have dropped as much as $2 per bushel since the trade agreements have shown signs of reaching impasse.

?The Chinese have some goals they believe they need to meet. They had shown some flexibility previously, but now there is a hardening of the positions on both sides of the table,? he said.

Having launched the negotiations with a bad start, Marek believes the administration needs to back up and make concessions that will bring everyone back to the table.

?Our senators and representatives have done a good job of relaying the dangers to the trade negotiators. They need to listen to us,? he said.

President Donald Trump has said it would extend $12 billion in aid to farmers to mitigate the effects of foreign tariffs on agricultural products. But most farmers prefer trade, not aid.

Iowa?s Senator Chuck Grassley has actively prodded the current administration to reach an agreement with its trading partners.

While he is well aware of China?s continuing encroachment on U.S. patents and technology, Grassley has criticized the president?s heavy-handed approach to negotiation.

In a recent statement released by his office, Grassley underscored the dangers facing American agriculture.

?I have said repeatedly that American agriculture will get hit hard by retaliatory action when trade negotiations start heating up. Earlier this year, I wrote a letter with the entire Iowa delegation to remind the president about the importance of free and fair trade to Iowa?s economy. Iowa is the second largest farm exporting state in the country. We exported $10 billion worth of products in 2015. Just consider that China last year imported 31 percent of U.S. soybeans. As I predicted, escalating trade tensions underway between the United States and key trade partners, including China and Mexico, are extracting a heavy toll on American agriculture, especially soybean, corn and pork producers,? Grassley said.

Closer to home, Iowa?s soybean farmers might bear the heaviest cost in a trade war.

?Every third row of soybeans grown in Iowa is exported. Shutting off one-third of a farmer?s revenue stream is not sustainable. As a lifelong family farmer, I share the overwhelming sentiments of farmers in Iowa who want to earn their livelihoods through the marketplace. Grain and livestock producers want prosperity from their productivity. That means having the ability to compete for every sale in every market,? Grassley said.

Keota farmer John Heisdorffer is the 2018 President of the American Soybean Association.

Recently, he amplified the Iowa farmer?s dilemma in the August American Soybean Association newsletter.

?It is imperative that we maintain the robust market we have worked so hard for decades to establish with China. China is our top market, importing 31 percent of our crop last year. They have a sizable 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,? he said.

The Senate and the House of Representatives have each passed a farm bill. But only a single bill can be ratified and it must be approved by both houses of Congress.

A group of legislators, the Farm Bill Conference Committee, is working to resolve differences and gain compromises that will enable the bill to pass before the Sept. 1 expiration of the current farm bill. Iowa Senator Joni Ernst was recently appointed to the committee.

?Farmers, ranchers and rural communities are the backbone of America?s economy, and we must provide them with the certainty and predictability they deserve. Finding common ground is imperative for producers and consumers across the country, and I am committed to working with my colleagues on a compromise agreement that ensures stability for our farmers,? said Senator Ernst.

Heisdorffer and his legislative committee have made their own views on the farm bill known to legislators.

?We are asking, first, that Congress pass a new long-term farm bill that increases funding for export promotion under MAP and FMD. The Trade Promotion Program announced by USDA last month will supplement these much-needed efforts, and we hope to see this funding extended over a multi-year period so that activities can be coordinated with the Congressionally-mandated programs,? he said.

In addition to asking Congress to pass the Farm Bill, ASA grower leaders urged the House Ways and Means Committee and Senate Finance Committee to support negotiation of new free trade agreements. ASA is asking that NAFTA be in place by the end of 2018, and that bilateral FTAs be initiated with Japan and other countries that offer increased markets for soy and livestock products. ASA also asked lawmakers to support funding to upgrade inland waterways infrastructure in order to maintain the U.S. competitive advantage.

?We need these tools,? said Heisdorffer. ?The certainty and stability of our industry depends on, number one, getting these tariffs removed as quickly as possible and, number two, taking steps now to offset the damage done by this trade war by negotiating trade agreements and funding programs essential to opening new markets for our farm products.?