While the world will continue to consume the same amount of soybeans as previous years, the Chinese tariffs on the crop will shift where U.S. soybeans are sold.
“We export a lot of soybeans and the major destination for those soybean exports is China,” Wallace Tyner a professor at Purdue University told AgriTalk host Chip Flory. “Sixty-eight percent of our beans go to China.”
According to Tyner, based on those numbers it’s not hard to figure out that U.S. soybean production and prices will go down as a result of the tariffs. Still, the U.S. won’t lose 68% of soybean exports.
“Brazil is going to take the Chinese market to the extent they can, but they can't take it all,” Tyner explained. “Brazil doesn't have enough soybeans to keep their own markets plus get the Chinese markets. Since they'll get 25% more, close to that, in China, they're going to focus on China, but then we'll take the markets they lose.”
Tyner’s research shows the estimated total loss in exports for the U.S. is 29%.
“Now that's not small potatoes. That's a big loss, but it's not the 68% loss that that we have to China,” Tyner says. “So, Brazil takes a good chunk of our Chinese market we take some of their market.”
When the tariffs become a significant problem is if they stay on for several years. That’s because Brazil has 9 million acres of opportunity to grow soybean production.
“If it stays on long enough for them to make the decision to do that, we're going to lose that that production, we're gonna lose that share of the market,” Tyner says. “So that's the real danger.”
According to Tyner, the one-year, $12 billion payment program announced by USDA on Tuesday will help producers this year but doesn’t solve the longer-term problem of losing market share. He says their analysis shows the U.S. and China both lose with tariffs in effect. In the U.S. Tyner estimates the losers are soybean producers, but in China anybody who feeds livestock or uses soybean oil loses.
“We estimate that both the U.S. and China lose $2.6 billion a year, every year that this thing is in effect. So, it's lose, lose for both the U.S. and China,” Tyner says. “The winner’s Brazil. Brazil gains $2.2 billion a year.”