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Escalating trade war with China to increase damage to American soybean farmers?

• Sep 26, 2018 at 8:00 AM

The Trump Administration’s decision to impose 10 percent tariffs on an additional $200 billion in Chinese imports — and China’s subsequent retaliation on $60 billion of U.S. products — deepens and prolongs the trade war between the two countries, posing even more adverse consequences for American soybean farmers, according to a group representing more than 300,000 soybean farmers.

“If this trade war is not resolved soon, we will see irreversible consequences,” said Davie Stephens, a soybean grower from Clinton, Ky., and American Soybean Association (ASA) vice president. “Beyond very real concerns about a continued price drop for our beans, we’re talking about the viability of our long-term relationship with the China market. We need negotiations now rather than tit-for-tat responses that hurt both countries.”

Since June, the price of U.S. soybeans at export terminals in New Orleans has dropped 20 percent, from $10.89 to $8.68 per bushel. Farm-gate prices have fallen even further. During the same period, the premium paid for Brazilian soybeans has increased from virtually zero to $2.18 per bushel, or $80 per metric ton.

Already, China has pursued new means to procure soybeans and other protein crops, including maximizing soybean imports from other exporting countries, particularly Brazil.

“With the situation worsening, these decisions could become long-term policies. Even if the Administration achieves its goal of changing China’s policies on forced technology transfer and intellectual property theft, which could end the tariff war, this trend could be irreversible. U.S. soybean farmers may become the supplier of last resort to what has been, by far, our most important foreign market,” Stephens said.

U.S. soybean producers have spent more than 40 years and millions of farmer dollars building the China market for soy and livestock products.

James Lee Adams, a soybean producer from Camilla, Ga., was ASA president in 1989 when these market development efforts were in full swing.

According to Adams, building the China market was a long, arduous process.

“We had a lot of opposition,” Adams said. “People thought we were throwing money away, but we kept investing despite the pressure to cut our losses. It took many years, but we prevailed, and today, China is a $14 billion market for U.S. beans. This trade war is of grave concern because it could wipe out all those years of work. Knowing the difficulties we faced, we know how hard it will be to get this market back.”

Some trade analysts say it will be impossible for China to find enough soybeans and other protein feeds from other sources, and that it will continue to depend on the U.S. for a significant amount of its imports. But even if the U.S. keeps half of its soybean market in China, the value of exports due to lower prices will fall to an estimated $5.6 billion from the $14 billion sold in 2017. In the absence of other expanded and new markets, the outlook is for continued low prices and declining U.S. soybean production for years to come.

ASA has consistently opposed using tariffs to pursue the Administration’s trade objectives, and has called for the Section 301 tariffs to be rescinded.

“Recognizing the long-term impact of China’s soybean tariff on our exports, we have implored the Administration to finalize NAFTA, including Canada, reconsider joining TPP and, if not, negotiate bilateral trade agreements with TPP countries, including Japan and Vietnam, and with other countries where soy and livestock product exports could be expanded, including Indonesia and the Philippines,” said Ryan Findlay, CEO of ASA.

“We are also asking the Administration and Congress to double funding for the Foreign Market Development and Market Access Programs for export promotion activities,” Findlay added. “While the additional cost of $2.35 billion over ten years can’t be covered under the 2018 Farm Bill, revenues collected by the Treasury from the Administration’s Section 232 and 301 tariffs already more than meet this funding level. Another use of these revenues if the tariffs remain in place and additional revenues are collected would be to fund the $8 billion in inland waterway improvements needed to upgrade the competitiveness of U.S. agricultural exports in future years.

“We need these market opening and competitiveness measures to help offset the expected long-term negative impact of China’s soybean tariff on the livelihoods of U.S. soybean farmers,” Findlay concluded.

The ASA represents U.S. soybean farmers on domestic and international policy issues important to the soybean industry. ASA has 26 affiliated state associations representing 30 soybean producing states and more than 300,000 soybean farmers.

Meanwhile, China reached into the U.S. heartland in its escalating trade war over Trump’s tariffs, using an advertising supplement in Iowa’s largest newspaper to highlight the impact on the state’s soybean farmers as “the fruit of a president’s folly.’’

The four-page section in Sunday’s Des Moines Register, which carried the label “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China,” featured such articles as one outlining how the trade dispute is forcing Chinese importers to turn to South America instead of the U.S. for soybeans.

The advertising targets a state critical to Trump and Republicans as the trade war between the world’s two largest economies intensifies. The U.S. is imposing tariffs on an additional $200 billion worth of Chinese imports starting Monday, on top of the $50 billion in goods already hit with tariffs. Meanwhile, $110 billion of goods from the U.S. will become subject to Chinese retaliatory tariffs around the same time.

“As the largest importer of U.S. soybeans, China is a vital and robust market we cannot afford to lose,’’ the supplement quotes Stephens, the ASA vice president.

China on Saturday called off planned trade talks with U.S. officials, and there’s a growing consensus in Beijing that substantive talks will be possible with the Trump administration only after the U.S. midterm elections in November, according to people familiar with the matter.

Besides the article about soybean imports, the Des Moines Register supplement carried a story highlighting a book about Chinese President Xi Jinping’s “fun days in Iowa’’ during trips to the state in 1985 and 2012, and a column with the headline, “Beijing can set an example for the world.’’

China placed similar pages focused on trade in a July issue of Roll Call, a newspaper that covers Congress and the U.S. political scene, but this seems to be its first attempt to go straight to U.S. voters. Former Iowa Gov. Terry Branstad is the U.S. ambassador to China.

Iowa has been especially hard hit by Trump’s trade policies and retaliation by China and other countries, according to a recent U.S. Chamber of Commerce campaign against the duties highlighting the impact by state. Total Iowa exports threatened by tariffs exceed $1 billion, including $30.8 million in soybeans, and the state has 456,300 jobs supported by trade, according to the chamber.

 

EDITOR’S NOTE: Mark Niquette and Jennifer Jacobs of the Bloomberg News (TNS) contributed to this story.

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