Tariff dispute has caused soybean prices to plummet
The trade war between the United States and the People’s Republic of China has reached Delaware farmers in the form of reduced prices for soybeans and the threat of costlier farm equipment.
A bushel of Delaware soybeans is down about $2 from this time last year, according to the state Department of Agriculture.
Most of Delaware’s soybean crop isn’t sold directly to Chinese markets, but a decision by the Beijing government to almost completely cut off American soybean imports has resulted in a glut across the United States, said Richard Wilkins, past chairman of the American Soybean Association.
“Anything that affects the export of soybeans is going to affect the prices,” Wilkins said. “What we’re dealing with here in Delaware is a lower market price for the soybeans.”
Wilkins, who farms in Greenwood, was the association’s president in 2016.
Delaware Secretary of Agriculture Michael Scuse concurs.
“With the tariff war taking place and the Chinese basically out of our market, it’s had a big effect on the pricing of soybeans,” he said.
Exports drop 97 percent
The most recent price drop can be attributed to a Chinese decision to drastically cut imports in reaction to Trump administration tariffs.
“There are places in this country where they’re running out of storage space for soybeans,” Wilkins said. “Normally China would be loading ships as fast as they could to send to their markets. But this year they’re not buying.”
According to an Oct. 23 account from Market Intel Reports, the United States Department of Agriculture said the U.S. shipped 7.4 million bushels of soybeans to China during the first seven weeks of the 2018/2019 marketing year; that number is down from 239 million bushels shipped during the same period a year earlier.
According to the 2016/2017 Delaware Agricultural Statistics Bulletin, the most recent report from the National Agricultural Statistics Service, in 2012 First State farmers earned an average of $14.40 per bushel.
That has steadily dropped to the point each bushel sold for $9.20 by 2017.
Per-bushel rates for soybeans and many other grains fluctuate almost hourly, but soybeans were reported at $7.20 per bushel as of 4:30 p.m. Friday, Oct. 26.
In the past, the Chinese government placed a nominal 3 percent tariff, or import tax, on American soybeans. They added another 25 percent to that figure in retaliation when President Donald Trump announced duties on about $200 million in Chinese exports to the United States.
Beijing did not place a tariff on other countries such as Brazil, Russia, Argentina or Ukraine, Wilkins said.
In China, soybeans are used as livestock feed, primarily for swine. Pork is a major source of protein for the population, and the country has more pigs than the rest of the world combined, he said.
In addition to using soybeans from other countries, Chinese farmers have learned to employ other types of grains for feed, cutting their need for American soy products, Wilkins said.
“Now that China is in this trade war situation, they’re realizing there are other things they can put in their pig rations that can be substituted for soybean meal,” he said.
White House fix needed
Scuse argues the Trump administration’s tariffs on Chinese steel and aluminum are essentially a double-whammy on farmers in Delaware and elsewhere because the price of farm equipment made from Chinese components is expected to go up.
“Not only are we receiving less for our products, at the end of the day farmers will be paying more for the equipment they use for production,” he said. “That’s the part being left out of these conversations.”
Scuse, who was USDA undersecretary and acting deputy secretary in the Obama administration, doesn’t place the onus on his former agency.
“This isn’t coming from the USDA, it’s coming directly from the White House,” he said. “There are some really good political appointees at the USDA, and Secretary [George “Sonny”] Perdue understands the situation our producers are facing. But there’s nothing they can do. This all has to do with the White House.”
Scuse said the USDA is working to develop new markets, but that will take time.
“It’s not something you can do overnight,” he said, adding he’s concerned the Chinese tariffs could become a permanent bar to U.S. soybean imports.
Wilkins said the tariffs have cost American farmers an important trading partner.
“We’ve lost that market where we were selling most of our soybeans to,” he said. “Now we have this extra supply.”
While other nations import U.S. soybeans, they cannot make up for the loss of the Chinese market, Wilkins said.
“There are other places in the world that need our soybeans, and now they can negotiate for a better price,” he said. “We have more, so we may be willing to sell them at a lower price to get the soybeans moving.”
With the loss of such a huge part of the Chinese market, American soybean farmers will be forced to sell their crops at a loss. If they hope to break even, they may come to depend on the $3.6 billion in assistance payments promised by the president.
In July, Trump unveiled a $12 billion Market Facilitation Program to help dairy, meat and grain farmers weather the tariff battles.