American farmers have just lost their fourth-largest customer as China pulls out of buying US agriculture products this week. It's a devastating blow in an environment of poor weather conditions across the Central and Midwest US and collapsing commodity spot prices, could trigger farm crisis 2.0.
"Sales have already been lower this crop year because of the existing tariffs. If we went all the way to no China exports whatsoever, that would, of course, result in an even larger market and price impacts," Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri, told CNBC. "Cutting China completely out of the market would be a very big deal."
Even before China officially said it would stop buying US agricultural products, the US Department of Agriculture's (USDA) weekly export sales data shows US corn exports plunged to a 19-month low in June and could be depressed even further in July as elevated spot prices and increased foreign competition continued to weaken exports, reported Reuters.
Corn shipments in the first ten months of the 2018-19 year that started Sept. 1 totaled 46.6 million tons, down 5% from a year earlier, and June was the first month in the 2018-19 year corn exports fell below prior-year levels.
USDA's weekly data showed the US had 6.7 million tons of corn to export during the last two months of the year to meet the full-year forecast of 53.3 million tons.
As of July 25, USDA's weekly export sales data showed unshipped 2018-19 corn at 3.89 million tons, the smallest volume for the date in at least five years. Monday morning's inspections data put US corn shipments at 631,289 tons in the week ended Aug. 1.
Total US corn commitments for 2018-19 reached 49.9 million tons as of July 25.
With US corn exports sliding lower, South American shipments have surged to meet demand. No. 2 exporter Brazil shipped 6.3 million tons in July, setting a new record for total exports of any month.
USDA estimates, Brazil, Argentina, and Ukraine, will export a combined 99.5 million tons in the 2018-19 year, a 52% increase versus the prior year.
Former Iowa Lt. Gov. Patty Judge said the loss of a trading partner like China sets up a "dangerous situation."
"There are going to be some serious repercussions for farmers," Judge said.
Those repercussions have already been seen as China avoids US farmers to source agriculture products from South America.