Brazil Needs to Stop Soybean Exports for U.S. to Recover Lost Demand

September 26, 2018 07:52 AM
 
 

China is ramping up its extreme discourse for the United States’ use of tariffs to resolve ongoing trade issues. On the heels of the U.S. following through on its promise to slap tariffs on $200 billion worth of Chinese goods, China fired back with more than just tariffs. Just this week, China placed a four-page advertisement in the “Des Moines Register” to highlight the impacts tariffs are having on Iowa’s soybean farmers. The lengthy advertisement said it was “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China.”

It’s a tactic that comes at a time when growing U.S. soybean supplies are also weighing on soybean prices. As the trade battle continues to sprout twists and turns, export season is now entering a critical time. Fall doesn’t just mark harvest in the U.S., it’s also the time when China typically starts coming back to the U.S. as the main supplier of soybeans. However, with trade tensions heating up instead of cooling off, some economists fear that instead of fixing trade issues, the Trump Administration is creating long-term demand destruction.

“I'm very concerned that we'll see changes in Chinese policy, changes investment - not just in China, but around the world - that will make it tougher for the U.S. to reclaim those markets, even if the current trade disputes are resolved,” says Pat Westhoff, Director of the University of Missouri’s Food and Policy Research Institute (FAPRI).

Westhoff says the real concern is once a country loses demand that’s taken years to cultivate, the trust and demand may take even longer to get back.

“I think if things get resolved tomorrow, we might see things quickly snap back, but if it takes even a few more months, we're going to start seeing some investments occur - some policy changes occur,” he says.

Looking at the numbers, the trade dispute with China is already eating into critical soybean buys. In 2017, China became the top buyer of U.S. ag goods, overtaking Canada. The USDA already cut China’s soybean imports to 95 million metric tons in 2018-2019, the first decline in 15 years. While Westhoff thinks China will need to come to the U.S. at some point to satisfy its growing appetite for soybeans, it won’t be near the levels the U.S has become accustomed to. That means the U.S. will need to make that demand up elsewhere, which he says is highly unlikely.

“We've seen increased imports by the European Union of U.S. soybeans, and that's been very helpful,” Westhoff says. “But again, if you look at the overall numbers, we have to have Brazil stop exporting to everybody else - and we would have to take over all those markets - for things to actually balance at the end of the day. That’s unless we're going to be able to sustain a significant share of the soybean market, which is going to be tough to see happen.”

Westhoff says there’s just not enough demand from other countries - at both the prices and quantities the U.S. wants - to make up for China’s lost U.S. purchases.

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Comments

 
Spell Check

Tractor Man
Somerset, KY
9/26/2018 10:26 AM
 

  The problem isn’t necessarily the trade with China. It’s mainly wall to wall corn and beans the last few years. I’m glad our president finally stood up to China. They were never our friend, they’ve traded illegally, attempted to steal corn and rice seed technology and dumped cheap junk and counterfiet products on our market for years. Keep in mind they were slowly increasing soybean purchases from Brazil over the US every year before the trade war ever started. Ask me it looks like they planned to eventually dump us for Brazil at some point anyway. If we can’t trade with them so what. It’s better to have a country left that you can farm freely in and maybe not able to buy a $60,000 diesel truck and $25,000 side by side every year plus vacation home than be taken over by China when they officially own us. The answer is a mandatory 5-10% set aside for crops next year and see where prices go.

 
 
Bob
Small town, KS
9/26/2018 08:35 PM
 

  Many US farmers, etc., voted for The Trumpmeister, fully well knowing his lies and bragging. We have not had a good candidate for several decades now, and I don't look for this to change any time soon. Just look at our school system and values lately. Decadence in our entire political system, etc. The voters have left things get out of hand for far too long. I guess we got what we deserve? We cannot place the blame on China or anyone else, we need to blame ourselves for our own ignorance and lack of concern.

 
 
Rick
Jonesboro , AR
9/26/2018 02:08 PM
 

  Tractorman has hit the nail on the head with his set aside idea. I think 15-20% would be much better though. However, for this to happen it will have to be mandated by USDA. I don't see that happening as the government loves these cheap food prices!

 
 

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