WASHINGTON, D.C. — Economists have expressed concern that President Donald Trump’s Phase One trade agreement with China may not save the nation’s soybean farmers.
John Newton, chief economist at the Farm Bureau, has stated: “The success of the U.S. soybean industry has largely been tied to China. In the two decades since China joined the World Trade Organization, U.S. soybean exports nearly doubled to more than 2 billion bushels during the 2017-2018 marketing year and soybean acres planted expanded by 15 million acres, or 20 percent, to 90 million acres planted in 2018.”
But retaliatory tariffs imposed by China and an African Swine Fever outbreak in Chinese pork facilities has led to a severe drop in the important of U.S. soybeans to China for human consumption or swine feed.
While a Phase One agreement may lead to a short-term rebound in soybean prices, the long-term outlook sees China building up its own soybean supplies or continue to turn to other countries to supply its beans as it has already done with countries in South America. The Chinese government has also mandated farmers to start converting more of their land for planting soybeans.
Prior to the beginning of the trade war with China in April 2018, soybeans sold for more than $10 per bushel, and the price quickly dropped about $8 per bushel since then. President Trump’s administration announced China would buy $40 billion to $50 billion in U.S. ag products following the Phase One agreement. However, no details were provided. Last week’s commodity market flirted with $8.83 per bushel as a high after starting out at $8.77 per bushel.
As a point of reference, Forbes reports China has until recently bought 30-35 million tons of soybeans per year, which has been about 25 percent of U.S. production. In 2018, the U.S. produced 4.6 billion bushels of soybeans or 138 million tons. China’s purchases in 2018 meant $8.5 billion to $10 billion to U.S. farmers. But with a drop of 53 percent in the 2018-2019 market year, that equated to $4.9 billion in lost income for American farmers.
According to Farm Bureau, Top 5 decreases for 2018-2019 marketing year include loss of 546 million bushels in China, following by double digit million barrel losses in Turkey, Netherlands, Pakistan and Vietnam. Argentina increased its market year purchase by 65 million bushels, which Spain increased by 31 million, Italy by 16 million, Mexico by 29 million and Canada by 21 million.
That still leaves a deficit of 449 million bushels.
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