The Cost of the China Trade War on U.S. Agriculture Becoming Apparent

01/03/2019

Reuters reported on the economic impact of the ongoing trade war with China in an article quoting Dr. Wally Tyner, an agricultural economist at Purdue University. He stated “it’s a lose-lose situation for both the United States and China” with losses to both nations of $2.9 billion to date following imposition of 25 percent tariffs on soybeans, wheat, corn and sorghum. In June China switched soybean purchases to Brazil, resulting in an escalation in FOB prices increasing the cost of imported beans to crushers and feed producers.

 

U.S. farmers have not been compensated adequately for the decline in CME-based unit revenue for soybeans and other commodities. U.S. agricultural exports to China fell by 42 percent over the first 10 months of 2018 compared with the corresponding period in 2017. It must be appreciated that China forward-ordered in anticipation of increased tariffs and only ceased purchases in June, during the second half of the 10-month period. Soybean futures averaged $8.75 per bushel from July to December 2018 compared to $9.76 for the second half of 2017. The president of the North Dakota Farmers’ Union estimated losses for his state’s membership to exceed $380 million for the 2018 crop season.

 

Despite a promise of “substantial quantities of imports” apparently pledged by China, only 1.5 million bushels were ordered and shipped. These December consignments were subject to the 25 percent tariff, limiting additional purchases from the U.S.

 

The economy of China is also hurting which is no comfort to U.S. farmers but may result in concessions in talks that have presumably commenced. Hopefully most issues will be resolved by the March 2nd deadline. Farmers must have some sense of future demand and prices to plan their crop allocations.






















































































































































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