US Farmers Choke On Trade War With China

In April we told you about how some of the "unintended consequences" of Trump's steel tariffs, such as an Illinois farmer who put the brakes on a $71,000 grain mill, but had to hold off on the purchase because the seller raised the price 5% to account for the rising price of steel, or Iowa grain mill producer Sukup Manufacturing, which had to hike their prices for grain storage bins. 

The Wall Street Journal now reports that the US-China "trade spat" is now affecting US exporters of soybeans, pork and other commodities. 

Since early April, when China announced tariffs on some U.S. agricultural goods and threatened to target others, Chinese importers have canceled purchases of corn and cut orders for pork while dramatically reducing new soybean purchases, according to U.S. Department of Agriculture data. Chinese importers’ new orders of sorghum, a grain used in animal feed, have dwindled while cancellations increased.

The chill in agricultural trade is sending jitters through the U.S. Farm Belt, which for years has dispatched farmers on trade missions to cultivate the Chinese market. -WSJ

As the summer persists and if nothing’s been resolved, it will start showing up as a pretty big hole in U.S. exports,” warned Soren Schroder, CEO of Bunge Ltd., one of the world’s largest soybean processors and traders.

Last Thursday, a ship bound for China carrying over 58,000 tons of American sorghum was diverted to South Korea after Beijing said it would levy a hefty deposit on U.S. shipments of the grain amid an anti-dumping probe.

Importers now facing losses of millions of dollars on their cargoes are trying to resell the grain to buyers elsewhere but are being forced to offer steep discounts.

Four cargoes have been resold to Saudi Arabia and Japan, and another is heading to Spain. If the ‘Peak Pegasus’ unloads in South Korea, it would be first of the Chinese cargoes to be resold in that country. -Reuters

No date has been set in stone for the various tariffs China has threatened to impose, however senior US officials including Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are meeting with Chinese officials in Beijing this week for negotiations. That said, even if they reach an agreement, the uncertainty created by the threatened tariffs has already done quite a lot of damage in the commodities sector.

China spent around $20 billion annually on US agricultural products in 2017 - and their growing apetite for pork and other meats requires huge quantities of feed grain, such as the aforementioned diverted sorghum. China-based importers are holding off on new soybean orders from the US, including their usual advance purchase of this fall's crops, as nobody wants to take the risk that a shipment will be slapped with a giant tariff by the time it is delivered. As such, China is buying more beans from South American suppliers, according to Bunge's Schroder.

Chinese buyers ordered about 255,000 metric tons of U.S. soybeans during the week ended April 5, according to the USDA, but new sales over the rest of the month came to about 11,000 metric tons, a sharp decline. Meanwhile, purchasers canceled nearly 76,000 metric tons’ worth of orders over the month. -WSJ

If [the Chinese] market closes, it could be devastating for local communities across the Midwest,” said Senator Chuck Grassley (R-IA) in a statement. 

Despite the fact that US soybeans are around $15 a ton cheaper than beans from Brazil, a 25% tariff would cost Chinese importers around $100 a ton according to St. Louis-based trader Ken Morrison. 

Ed Breen, chief executive of crop-seed supplier DowDuPont Inc., said Thursday that if China steps back from U.S. soybean purchases, growing markets like Mexico, Indonesia, Vietnam and Turkey would fill the void. -WSJ

Following China's tariff on US pork products on April 2, the USDA reported the largest weekly drop in net pork sales to the country since October 2016, and sales have declined further since then.

Given expanding pork supplies—boneless hams in cold storage hit a record 86 million pounds earlier this year—and another big slaughterhouse set to open later this year, the industry has been aiming to sell more to China, not less. -WSJ

“With the trade negotiations, a lot of unknowns with our future demand is clearly not a positive to the pork market at this stage,” said Jason Roose, VP of U.S. Commodities Inc., a livestock and grain advisory firm based in Des Moines, Iowa.

Given China's growing need for agricultural imports, some believe that China won't be able to avoid US crops for long. That said, the biggest danger in this trade war is US farmers and agricultural companies developing a reputation for unreliability - prompting other countries to maximize their own crop production, according to research firm AgResource Co's President, Dan Basse. 

“Our biggest concern is the message this sends to the world,” said Mr. Basse, adding that “Brazil still has an abundance of land to bring into production, and farm profits there would rise to the chagrin of the U.S. farmer."

Trump might be wise to note that the very US farmers suffering the unintended consequences of the trade spat with China are the very same folks from he promised not to neglect.

Comments

DocMims cheka Fri, 05/04/2018 - 22:22 Permalink

The soybean crop in the US has not been planted yet.  Brazil is having a bad year with poor production due to drought.  If US farmers cut back soybean and sorgum production.  Food inflation will soar in China causing unrest that the government can't afford.

Plus companies with operations in Brazil and the US will just divert US supply through Brazil.

In reply to by cheka

Shibumi2 Laowei Gweilo Sat, 05/05/2018 - 10:16 Permalink

I really dont give a shit if these pig-fuckers want our soybeans or not. American farmers should permanently shift a large percentage of their soil inventory to hemp and other high value crops and watch them fold when they realize the pipeline is going offline permanently.

 

Seriously, government and fiscal policies resulted in the american farmer becoming serfs to these useless eaters so that China could feed the working serfs doing corporate americas low wage shit work. Its time to put free market forces back to work...and if Trump doesnt back the farmers and make them whole for their political losses, he is a fool...and I dont think he is a fool.

In reply to by Laowei Gweilo

bshirley1968 Shibumi2 Sat, 05/05/2018 - 10:40 Permalink

Hemp and other high value crops?

Damn, just how much weed can the country smoke and still maintain coherence?

Trump back the farmers? Fuck that! I am tired of the goobermint being expected to bail out failing industries because the have become too big to fail....and pseudo government employees in the first place. When I was growing up, we had a word for that, we called it "socialistic/communism".

Depend on the goobermint; die by the goobermint.

In reply to by Shibumi2

Shibumi2 bshirley1968 Sat, 05/05/2018 - 11:29 Permalink

Do some research on the topic. There is little or no THC in industrial hemp but it is a cotton replacement, can be made into plastic like materials that decompose in landfills without poisoning the water tables, and the seeds are a perfect food source for human nutrition. Plus it grows anywhere, quickly, and needs no pesticides...its a weed after all.

 

The temporary government subsidies are to amend for damages done by prior political policies and actions. A few years to support the folks that have been feeding us for a century or so.

 

In reply to by bshirley1968

MoralsAreEssential Shibumi2 Sat, 05/05/2018 - 10:49 Permalink

It is unbelievable how ignorant most Americans seem to be about the SOY CROP.  It not only POISONS the animals who are forced to eat it (along with the GMO toxic corn) BUT HUMANS ALSO.  I can't think of another FACTOID about our toxic living conditions which people are so absolutely ignorant about.  DON'T EAT SOY AND DON'T EAT CORN; for that matter, WHEAT IS ALSO TOXIC TODAY FOR SIMILAR REASONS.  Why do you think people are so *ucking fat and have these diseases like "gluten intolerance"?  IT IS A CREATED INTOLERANCE through the polluted toxic food now produced.

In reply to by Shibumi2

Crush the cube DocMims Sat, 05/05/2018 - 01:37 Permalink

Yeah, this is an utter BS story, they always stop buying over these months.  Chinese ports can't handle south american beans and ours at the same time, and they always buy those markets over these months.  Big fat nothing burger, more fake news.  If it were true the price would reflect it, but it doesn't in the least. 

As far as pork, the Canadians have utterly torpedoed that market, not the Chinese.  Sorgum?  LoL'z, you mean there's an actual market for that weed?  Farmers are in deep do do, but it ain't the Chinese who done it.

In reply to by DocMims

east of eden DocMims Sat, 05/05/2018 - 09:06 Permalink

Yep. Found one. Another American who is absolutely convinced that no matter what kind of bullshit their government gets up to, they will win in the end.

Not so much, goof. The Chinese have millennia of experience under their belt dealing with tight food conditions. I don't think your soybeans are going to amount to a hill of beans. Farmers in all areas of the world will instantly increase crop planting and your 'edge' will disappear very quickly.

The Chinese currently purchase 70 million metric tons of soybeans (from total production of 100 million tons) from the US, each year. The value of those sales, at today's prices is 30 Billion US. Now the really big food corporations, like Cargill, may be able to take the hit, but I can guarantee you the 'hit' will be passed down to farmers in the US in the form of much lower prices, since demand for US Soybeans will have collapsed by 70%. Can the marginal or even medium scale producers take a hit like that? Can the regional banks that own their debt take the hit? Can the communities they live in take the hit. Time will tell. I have a feeling that sometime late in the fall of 2018 you are going to see a lot of Congress Critters clamouring for 'farm aid'.

In the meantime, Canada is planting another several thousand hectares of soybeans this year which should result in a production increase of 4 million tons, while Brazil and others are doing the same. It will only take 5 or 6 countries upping their production to replace American soybeans. Concurrently, our pork producers will be dramatically upping their live stock for export to China, the market for which, as one commenter correctly point out is 'owned by the Canadians'.

Also, from the article:

Despite the fact that US soybeans are around $15 a ton cheaper than beans from Brazil, a 25% tariff would cost Chinese importers around $100 a ton according to St. Louis-based trader Ken Morrison. 

Ed Breen, chief executive of crop-seed supplier DowDuPont Inc., said Thursday that if China steps back from U.S. soybean purchases, growing markets like Mexico, Indonesia, Vietnam and Turkey would fill the void. -WSJ

Following China's tariff on US pork products on April 2, the USDA reported the largest weekly drop in net pork sales to the country since October 2016, and sales have declined further since then.

But hey! Good luck with your current 'act of hostile aggression'. I'm sure it will work out for you. /s

It's actually kind of great for us. Whether it was softwood lumber, steel, aluminium or anything else the Orange Jesus has attempted to control, the value of our companies making those products have skyrocketed while the value of your companies making the same products, have collapsed, just like your wheat exports collapsed in 2015 (by 50%) and never recovered (first year GMO crops were attempted to be sold). We will take all the customers and market share that your 'politics' and 'politicians' tell you that you can't service anymore. Love it! Guess you are going to have to try to invade us again. HA! Pick up your snowshoes, mukluks, moose mittens, and trusty northern bred donkeys in Montreal on your way up. They "LOVE" Americans and will fuck you royally every time, guaranteed.

What won't return nearly so quickly is your access to the Chinese markets.

In reply to by DocMims

MoralsAreEssential east of eden Sat, 05/05/2018 - 10:54 Permalink

Uh, Canada is NORTH of the US last time I looked.  NORTHERN areas are becoming COLDER and NOT favorable for producing FOOD of any kind because we're going into a mini ice age.  But you keep on believing in that Global Warming lie.

I noticed you implied that Canada was exporting non-GMO soy?  If that's the case, I applaud you; however, your crops are still not going to thrive.  I hope whatever happens KILLS the US GMO TOXIC SOY CROP MARKET.

In reply to by east of eden

Beltain east of eden Sat, 05/05/2018 - 18:13 Permalink

Really? Five or Six countries? Argentina is the only country you mentioned that even ranks in the top 10 producers and they produce only a paltry 4.6% of the total compared to the US's 43.9%... Even if every country turned their arable land into soybean production they wouldn't be able to reach the US levels of production and most of them couldn't even start until next year.

 

I will admit though that time can be a factor but the US soybean harvest is still months away and a lot can happen between now and then.

 

In reply to by east of eden

bshirley1968 DocMims Sat, 05/05/2018 - 10:20 Permalink

The very thoughtful logic I would expect from a Trumptard.

Yeah, boy, it's a good thing those farmers haven't planted those soybeans. They should probably just go fishing. They don't need to make their debt payments or maintain operations. I am wondering why they even bother planting anything.....that might get boycotted or get a tariff placed on it.....hell, we should just shut down the whole farming industry. That'll show those mean Ole China mens....lmao.

I am sure the real issue for the farmers is how will they make up that list crop income? By flooding the market with another crop? Either scenario ends is more goobermint subsidies to keep the goobermint farming industry afloat, and higher prices on the American food industry to offset income losses.

Plenty of places in the world to make up food production cuts from the US shipped to China. It's the US farmer that is on the debt treadmill that is going to suffer most....and of course those of us he passes his problems onto.

In reply to by DocMims

sabaj49 DocMims Sat, 05/05/2018 - 11:25 Permalink

given massive need for beans, china will shake its head and then find way to bypass(via south korea) tariffs

south america cannot even with bumper crop provide enough

than again - why isn't u.s. putting export tariffs in place on raw materials??

and import tariffs on 'stuff' they manufacture

In reply to by DocMims

Laowei Gweilo matermaker Sat, 05/05/2018 - 04:39 Permalink

 

on one hand, don't underestimate the stubbornness and nationalism of Chinese consumers.... see Japan, Korea, and Hong Kong. the biggest threat to US agriculture is not even official policy from government but unofficial behaviour changes by consumers.

 

that said ... US position in Soy and Chinese demand for soy not really analogous to the Japan, Korea, and Hong Kong examples... US has massively dominant soy position... and China fucking loves its soy 

In reply to by matermaker

MoralsAreEssential cheka Sat, 05/05/2018 - 10:26 Permalink

All the wealthy through CONgress product manipulation and financial scams to billionaire farmers who plant and harvest toxic crops, factory farm living animals under cruel conditions and support slaughterhouses employing mostly Illegals and using horribly cruel slaughter methods (which BTW cause the animals to release hormones which have negative effects on consumers of that meat along with the drugs and unfit diets consumed by the living animal) can *uck Off.  The small farmers who are already devastated by the takeover of BigAg have my utmost sympathy; however, maybe they can come together and create consortiums of healthy food (and animal) crops which are not harvested using toxins.  Even the milk from dairy cows has been polluted and changed according to Dr. Mercola.  All our US produced food is toxic garbage even "organic" which in many cases is polluted through harvesting chemicals.  Vegetables have no vitamins in them any more and animals are fed unsuited diets which their bodies do not process to create healthy animals producing crap meat as well.  The BigAg system needs to be destroyed.

In reply to by cheka

Dirtnapper brianshell Sat, 05/05/2018 - 10:13 Permalink

No-Till is destroying the nutrition in food.  After decades of use, the crop's roots have depleted trace minerals in the soil.  We started on a downward slope in what nutrition food provided in the late 60's and it's getting far worse.  That bag of greens you bought thinking it's healthy is only a fraction of nutrition that your grandparents were getting in the same volume.

China is using this excuse of a trade war to buy time as they feed the population the bull story of trade wars causing food price increases.  Asia's crop yield is down, India is getting the full Grand Solar Minimum treatment with a massive drought.   You will see US crop growing zone shift at least 300 to 500 miles further south as GSM kicks in over the next few years.  Canada is just fucked, they will have just a few counties that will be able to produce wheat at poor grade.

In reply to by brianshell