As was widely expected, China's decision to slap 25% tariffs on US soybeans has caused orders from Chinese importers to slow to a trickle as Chinese companies are slowly finding other markets to source the crops, which are typically ground into protein meal to feed China's massive population. And in addition to Brazil, which has seen exports to China rise as it surpasses the US as the world's largest producer of soybeans, Russia's nascent soybean industry is undergoing a boomlet at the expense of American producers.
According to Russian Prime Minister Dmitry Medvedev, the country's soybean producers could take over the market share that was effectively abandoned by the US when Trump launched his trade war with China, which, despite a tentative agreement for Trump to meet with Chinese President Xi Jinping later this month, is showing no signs of slowing. As RT pointed out, China and Russia, which are already working together to increase bilateral trade denominated in their respective currencies, are also planning to work more closely to foster trade in agricultural goods, including pork, rice, poultry, fish.
"Soybeans are in very big demand in China," Medvedev told reporters Wednesday during his three-day visit to China.
"The Chinese market is huge as they import about 95 million tons of soybeans annually, including 30 million tons from the US."
This comes as US shipments of soybeans to China reportedly shrank by more than 80% in September as the bite from the tariffs finally started to impact the market.
"A certain part of the soy market has been made available. We agreed with the Chinese partners to hold a more active presence in this particular segment," Medvedev said, stressing that the step provides Russia with a good opportunity to boost soybean production.
The latest federal data, through mid-October, shows American soybean sales to China have declined by 94 percent from last year’s harvest. Meanwhile, Russian exports are booming, with Russian farmers expected to harvest a record 3.9 million tons in the current season that ends in 2019.
And as we pointed out earlier this week, this has left North Dakotan soybean farmers in a difficult spot, as orders from their farms have slowed to a trickle.
And though Soybean farmers will receive the lion's share of $4.7 billion in payments authorized by the Department of Agriculture under its Market Facilitation Program, part of Trump's bailout for farmers, this aid is only temporary, and won't guarantee that new markets for American soybeans can be cultivated (though another $200 million has been earmarked explicitly for that purpose).
Here's a quote from a story in the New York Times:
Kevin Karel, the general manager of the Arthur Companies, which operates six grain elevators in eastern North Dakota, has started to pile one million bushels of soybeans on a clear patch of ground behind some of his grain silos. The big mound of yellowish-white beans, already one of the taller hills in this flat part of the world, will then be covered with tarps.
But for Russia's soybean farmers, the US's misfortune has created an unprecedented boom. Over the past 10 years, Russia’s soybean production has been increasing, with farmers expected to harvest a record 3.9 million tons. Russia will likely export 700,000 tons of the product, which, though that sum is significantly less than Brazil, which is the world’s leading soybean exporter, which may sell more than 76 million tons this season, it's still a huge increase.
Yet while the harm being done to farmers, a key constituent of Trump's base, could undermine his prospects of winning a second term in 2020, we wouldn't be surprised to hear some of his Russia-obsessed critics cite this as just one more example of how President Trump is putting Russia's interests above the US's.
And taking that logic one step further would suggest that the US trade war is Putin's fault.