President Donald Trump’s trade war with China may have a lasting impact on American agriculture if it drags on, with the Asian nation already halting U.S. soybean purchases, according to the head of Cargill Inc.
A long-term dispute could shift perception of the U.S. as a reliable trade partner and prompt China, the world’s largest importer of soybeans and the biggest buyer from the U.S, to turn to other sources of protein to feed its chickens, pork and other livestock, Chief Executive Officer David MacLennan said. That could squeeze U.S. growers out of the industry.
“Maybe if it were fixed quickly, we might go back to the way it was, but long term I’m concerned it has a detrimental effect on the U.S. agricultural economy,” he said in an interview with Bloomberg Television on Tuesday.
Soybean prices are near the lowest levels in a decade as China slapped tariffs on U.S. supplies in retaliation to U.S. taxes on Chinese goods. On top of that, there have been good growing conditions in North America and Brazil.
China has committed not to buy American soybeans because of the trade war, but also because of pride, MacLennan said. The head of the largest privately-held U.S. company was among a group of leaders that met with Xi Jinping before the trade war deepened over the summer and the Chinese President said his country wouldn’t back down, he said.
“He was very clear: ‘we’re not going to stand down, this is a matter of pride for my country and we’re not going to be bullied’,” MacLennan said. “So you can speculate from that remark they’re going to stay and find alternative sources of supply. But again, price can drive a lot of different decisions.”
While Cargill hasn’t built in a long-lasting spat into its books, the company is concerned that the dispute could turn the center of gravity away from U.S. farmers.
China may look to other grains such as corn to feed its animals and the nation probably will invest in agriculture outside the U.S., the CEO said. The trade war has already boosted soybean premiums in Brazil and Argentina.
China’s state-owned Cofco Corp., the nation’s largest food company, bought Dutch grains trader Nidera and the agriculture arm of Noble Group in recent years, a sign of their ambitions, MacLennan said.
Cargill is spending more time talking to lawmakers including the secretaries of commerce and agriculture, who are sympathetic, according to the CEO.
“We recognize what they are pursing is a tactic to make trade more fair and balanced and ultimately we are an American company, we understand the reasons behind some of the moves," MacLennan said. "But we just think there are other tactics that can be pursued to improve trade relations."
Copyright 2018, Bloomberg