Trade Wars: ‘No Winners, Only Casualties’

July 31, 2018 01:00 PM
What are the ramifications of a trade war with China? Just look at the corn and soybean prices of the last six weeks.

What are the ramifications of a trade war with China? Just look at the corn and soybean prices of the last six weeks, says Joe Glauber, senior research fellow, International Food Policy Research Institute and former USDA chief economist.

Take a look at the November Soybeans chart:

November 2018 soybeans

And here is the December Corn chart:

December 2018 corn


Recently soybean prices have recovered a bit, after plunging in the last several weeks. Prices for commodities like soybeans, wheat, pork, beef, dairy, cotton, almonds and cherries have dropped so much that last week, USDA announced it would provide $12 billion in relief to farmers suffering financial harm from the trade tactics enacted by President Trump.

While some of the decline in corn and soybean prices can be attributed to record soybean acres and good crop conditions, Glauber says, it’s also due to the fact that one of every four acres of soybean production goes to China.

Even though the Chinese market is especially critical for soybeans, he says the ongoing trade uncertainty is also impacting corn, wheat and livestock markets.

“Things could get worse before they get better,” says Glauber, who spoke at the recent Agricultural Symposium, hosted by the Federal Reserve Bank of Kansas City. “In trade wars, there are no winners, only casualties. They aren’t easy to win.”

Even if the trade dispute continues with China, Glauber says, U.S. soybeans will find a home to be consumed. But, the long-run aspect is that it puts a lot of costs on an efficient transportation and logistics system that has taken decades to build.

Who will feed China’s appetite for soybeans?

“Brazil is going to take the Chinese market to the extent they can, but they can't take it all,” Wallace Tyner, agricultural economics professor at Purdue University, told AgriTalk host Chip Flory. “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.”

While Brazil can’t immediately meet all of China’s soybean needs, if the tariffs stay in place for a significant amount of time, it would give Brazilian farmers a chance to increase their soybean acres, Glauber says.

“They have land they can expand into, and they can double-crop corn,” he says. “If this [trade situation] continues, we will see that. That will put more stress on Brazilian infrastructure and Brazilian farmers would have to build more storage facilities. A lot of little things like that that would add cost to the system. It will be a big disruption for a supply chain that has grown to be really efficient.”

Additionally, the Brazilian government imposed a rule change in late May that pushed up freight costs as much as 150%. That move will squeeze farmers’ profit margins and potentially halt soybean expansion.

The uncertainty around trade is weighing heavy on the already stressed agricultural sector, says Esther George, president and CEO, Federal Reserve Bank of Kansas City.

“To date, the impact of new tariffs on the broad economy has been minimal,” she says. “However, anecdotal reports from our business contacts suggest that some companies are taking a ‘wait and see’ approach to new capital spending due to uncertainty about future trade policies.”

Will this slow the U.S. economy, which has been firing on all cylinders? The verdict is still out.

Back to news


Spell Check

Jonesboro, AR
8/1/2018 07:50 AM

  Great point Phil! Lots of Obama lackeys used to trash Trump policies in these columns published by Agweb. And yes, there will be a winner in these trade disputes when the dust settles. I think it will be the guy who has a habit of winning!

Get real!
Look in the mirror..., IL
8/1/2018 09:13 AM

  My guess is that the guys blaming tariffs for all their troubles are the same guys paying $300+ in cash rent. The ones who paid $12,000+ for a tract of land. The ones who bought millions of $$$ worth of equipment. The ones who are in debt up to their eyeballs. Look in the mirror if you want to see who's really the cause of your problems. Hard to accept, but it is the truth. MAGA!

Lockport, IL
8/1/2018 06:37 AM

  Wow! Who would have thought an Obama administration official would be happy to tell us how bad the Trump administration is? Why didn't you ask him why they let things get this bad in the first place. Why didn't they do anything about patent/trademark infringement, intellectual property theft, and more? It's always a whole lot easier to cast aspersions on the one who is left to fix a problem rather than explain why you were just whistling past the graveyard rather than actually addressing the problem.


Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer