$8 Soybeans Possible if China's Tariff Threat Becomes Reality

April 4, 2018 11:52 AM

The trade dispute between the U.S. and China escalated overnight as China fired back with another round of retaliatory tariffs. China is proposing tariffs on 106 products that would equate to $50 billion with much of that could come at the cost of U.S. agricultural goods.

China is targeting a host of agricultural products from the U.S., including soybeans, sorghum, wheat, cotton, beef, cranberries, orange juice and tobacco.

However, it’s the 25 percent proposed tariff on U.S. soybeans that’s sending shockwaves through the markets, with soybean prices at the Chicago Mercantile Exchange (CME) dropping 50 cents overnight. If the threat becomes real, Purdue University agricultural economist Chris Hurt says $8 soybeans are a realistic possibility.

“I think we could be talking dollars lower in terms of prices,” said Hurt. “We have trade around $10 to $10.50 in terms of futures prices, so we’re probably talking about $8 dollar futures. That’s not a ridiculous statement.”

Hurt points out China still needs to buy U.S. soybeans, as it can’t source enough product from other countries. That was proof Wednesday morning, as U.S. Department of Agriculture (USDA) announced a 129,00 metric tons soybeans purchase by China for the 2018 to 2019 marketing year. USDA also reported a sale of 325,000 metric tons of soybeans to an “unknown destination,” however, Farm Journal economist Chip Flory says that sale is more than likely to China.

We supply 30 percent of all their use of beans,” said Hurt. “They need us. They can't replace that in Brazil and Argentina in the short-run.”

China’s most recent action of targeting ag products in in addition to the 25 percent tariff already announced in U.S. pork.

“Let’s get a little perspective how important pork is in terms of dollars of sales to China, it was $1.1 billion 2017,” said Hurt. “Soybeans are $12.4 billion of sales. So, soybeans are in the range of 12 times more important to U.S. farmers in terms of sales to China.”

Hurt calls U.S. soybeans the “crown jewel of agricultural exports” to China. He says looking at the potential impact is huge if the tariff does become a reality.

“As we look at that that says that the impact on pork, we think the tariff probably will reduce prices maybe $3 to $6 a head on pork, but that's only 2 percent of our production in the United States,” said Hurt. “We're looking at more like probably 30 to 40 percent of our production going to China on soybeans. So that impact certainly could be large, but it will depend on the details.”

The details are something that still need to be worked out, but Hurt says his biggest fear is the U.S. would lose its place in line as a top supplier of soybeans to China.

“If we would become a residual supplier to China, meaning they would come to us last, and Brazil and Argentina, they would go there first-we don't want that in US agriculture.”


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Spell Check

Harold Kallal
Jerseyville, IL
4/5/2018 08:16 AM

  Why should price go down at all? Go take a basic econ class. If China buys all the S. A. beans, the people who were buying from SA will come buy from the US. The same amount of beans will be exported or more than the year before because demand has been increasing. Importers like SA beans because they are a little higher portein that is why they are sourced first, then they come to US. The ships may not say China when they leave the US ports but once they leave they will head to China. This is the same as the Russia grain embargo of 1980, when the ships left the US they didn't say Russia but they were unloaded there. Educate yourselves, alot of people fell for China's bluff yesterday.

bad axe, MI
4/4/2018 05:05 PM

  It don't matter if they can't find enough soybeans around the rest of the world. The question now is what are we going to do with all the beans they don't take. CHS and all the big guys will figure a way to sell beans threw other countries to get the beans out of the US and make the $2 dollars were losing pretty good gig.

Jim Weeber
Goshen , IN
4/5/2018 05:35 AM

  "The Art of the Deal," Take an aspirin if your in a knot over these events. Since before Christ when the Egypitians were pumping water on the Nile with human power and the inclined plane; food has been raised with slave labor. It still is today. Though much of the drudgery and certainly the brainless part of farming is mostly removed. 40 years ago most farmers would look at you with a blank stare about marketing issues. We have done this to ourselves and invited more fingers into our pie with all the great ideas promoted by experts at land grant universities and industry leaders. From here on out always operate in survival mode if you are not already. This may mean things at your place won't be as pretty but you might sleep better. In the end equity is the name of the game. The more you have the more you operate from a position of power and family security. My Thursday morning sermon.


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