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A lot of ifs surround soybean market and proposed tariffs

By Staff | May 11, 2018



The U.S. Soybean Export Council believes uncertainty surrounding trade between the U.S. and China has fueled the halt in new soybean sales to that country.

While soybean shipments to China do slow down somewhat around this time of year, the council believes the stagnancy stems from the proposed tariffs issued by both countries. USSEC chief executive officer Jim Sutter said that if tariffs were imposed, most of America’s market opportunity to ship U.S. soy to China would be hurt. Currently one-third of U.S. soybeans are exported to China and comprise almost 40 percent of that country’s soy imports.

Chad Hart, economist with Iowa State University Extension, confirmed that if the tariffs would take effect, soybean prices would fall as the drop in Chinese soybean purchases from the U.S. would become more permanent until the tariff is lifted. China likely would still purchase soybeans from the U.S. with the tariff in place, just not as much as before, he said.

His best guess of the drop in prices? Ten to 12 percent. But, the good news is that the decline likely wouldn’t last long.

“As China would move some purchases from the U.S. to South America, that would open up other markets to the U.S. that are currently being filled by Brazil and Argentina,” he said. “A few weeks after the tariff hits, we would likely see prices partially rebound as those other markets slowly absorb some of the soybeans that would have originally been shipped to China. But I don’t think prices would fully recover, barring a short crop this fall, because the drop in Chinese purchases will be larger than the growth in other markets, i.e, global demand for soybeans falls.”

Hart said that China has shifted its purchase power to South America, but will continue to buy some new crop soybeans from the U.S. in the meantime. The question remains, though, whether or not China will back off on the new crop purchases.

“They haven’t bought as much as they did last year, so that’s something we’ll watch over the next couple of months and see if there are any issues cropping up there,” he said. “The markets responded strongly to the initial announcement of proposed tariffs, but recovered almost as quickly. The markets are trading under the assumption that the U.S. and China will figure this out sooner rather than later,” Hart said.

Keota, farmer Lindsay Greiner is president-elect of the Iowa Soybean Association who farms 1,400 acres with his son in southeastern Iowa. Sixty percent of his crop is corn; 40 percent is planted to beans. He admitted to being worried not just about crop prices, but the market opportunities possibly being lost because of the trade issues.

“We have a market there that we’ve spent 35 years developing and it’s grown almost every year in those 35 years. We’re worried about losing that market. Some of us older guys still remember the Russian grain embargo back in the ’70s and how that affected our markets; that’s one of our biggest concerns,” Greiner said.

Greiner believes the soybean market would take a “drastic dive” if the proposed tariffs were implemented. Still, he hasn’t changed his operation’s marketing plan much in light of the looming concerns.

“I have concerns about the tariff war and what it could do to the soybean market, but I also am hopeful that current negotiations can iron out some of the trade problems. There’s way too much at stake for both countries to not work out a deal that benefits both of us,” he said.

Representatives from U.S. soybean-farmer-led organizations joined their counterparts from Brazil, Argentina, Paraguay, Uruguay and Canada to discuss the benefits of biotechnology with Chinese stakeholders during the International Soy Grower’s Alliance (ISGA) mission trip to China recently.

Also, a U.S. trade delegation led by U.S. Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross that also includes U.S. Trade Representative Robert Lighthizer, Larry Kudlow, the director of the National Economic Council, and Peter Navarro, who is director of trade and industrial policy in the White House, opened up trade talks in China that began May 3. Liu He, a Chinese vice premier and Xi’s top economic adviser, is leading the Chiense delegation.

Greiner said that word coming back from the trade talks has been positive so far.

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