New York (AFP) – American soybean producers could be big losers if Beijing follows through on plans to impose tariffs on the commodity in retaliation for President Donald Trump’s trade crackdown.
China is the biggest buyer of US soybeans, ordering about $12 billion worth of the crop in 2017, or about 30 percent of US production.
Beijing announced early Wednesday that it plans to impose levies on $50 billion worth of US exports. The list included soybeans, which are grown in the US Midwest in rural areas that voted overwhelmingly for Trump in November 2016.
Industry officials were disappointed by the turn events, even if they were not especially surprised.
“We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised,” said John Heisdorffer, an Iowa farmer and president of the American Soybean Association.
“A 25 percent tariff on US soybeans into China will have a devastating effect on every soybean farmer in America.”
Soybean futures slumped around five percent soon after China announced the move and finished down 2.2 percent in Chicago on Wednesday.
“There is still time to reverse this damage, and the administration can still deliver for farmers by withdrawing the tariffs that caused this retaliation,” Heisdorffer said.
“We call on President Trump to engage the Chinese in a constructive manner —- not a punitive one -— and achieve a positive result for soybean farmers.”
– Can China find other suppliers? –
The US industry is also searching for new markets “to build a portfolio of global demand for US soy products,” said Lewis Bainbridge, a South Dakota farmer who is president of the United Soybean board, which promotes American growers.
US farmers had been planning lower output of soybean compared with last year’s level, according to a report published last week.
“Farmers were already saying they were going to cut back,” said Chad Hart, an economist at Iowa State University.
“This type of news could get them adjusting even more as we enter the planting season.”
The burgeoning conflict also raises questions for Beijing.
“It would disrupt trade patterns,” said Bill Nelson, senior economist at Doane Advisory Services, an agricultural research and consulting company.
“Unless China is willing to significantly cut back on meat production, the animals have to be fed, and there are not so many sources of alternative food for chickens and hogs.”
Nelson noted that China could tap into its strategic reserves of soybeans or grow more soybean domestically, but that such moves “could only make a small difference.”
China could turn to farmers in Brazil and Argentina, which are also big soybean producers. But some are skeptical that other suppliers can make up all of the difference.
“There is not another large producer big enough” to replace the US, said Hart, who thinks Chinese importers will pass on the cost.
“Soybeans will just be more expensive, which will lead to higher prices for their consumers.”