U.S.-China trade resolution likely but absent major upside for soybean farmers02/07/2019 | Soybean News
By Aaron Putze, APR, ISA communications director
While the trade friction between the United States and China has recently cooled, Iowa Soybean Association’s chief executive officer said exports to the country of 1.4 billion aren’t likely to heat up any time soon.
“I don’t doubt we’ll have a political, face-saving announcement between the two countries in the near future,” predicted Kirk Leeds. “But I don’t believe we’ll resolve the serious, underlying issues between the two countries.
“It’s a new phase of our relationship that we’re going to have to manage and one that’s absent of any short-term or significant improvements in soybean sales and prices.”
Leeds, speaking to more than 100 farmers gathered Monday for a Practical Farmers of Iowa dinner in Ames, said the nearly year-long dispute between the world’s two largest economies has relegated U.S. soybean farmers to residual suppliers.
That’s a far cry from being a primary supplier, a designation that took U.S. soybean farmers almost three decades to achieve.
China “was once just a dream,” Leeds said, referring to its potential as a destination for soybeans.
Prior to 1990, the country was a net exporter of the legume, valued for the versatility of its meal and oil. By 1995, China transitioned to a net importer due to rapid increases in population and poultry, pork and fish consumption.
Fast-forward to 2010 and China was importing nearly 1.5 billion bushels. In 2016-17, the country’s soybean imports totaled more than 3.5 billion bushels with nearly 1 billion originating from the United States.
Multiple U.S. administrations have asserted the need for Chinese trade reform, Leeds said. The country has loudly proclaimed its desire to be the world’s superpower. It’s also widely and routinely criticized for violating World Trade Organization provisions, artificially delaying import approvals for ag commodities that have been genetically modified and stealing or reverse engineering intellectual property and technology.
“The Trump White House pledged to be hard on China and tough on trade,” he said. “The need for reform with China is real, but can it be achieved while simultaneously engaging in unilateral trade wars with multiple trading partners? Only time will tell.”
Leeds has traveled to China nearly 25 times on behalf of the Iowa Soybean Association. The country’s leadership, he said, is politically astute and made no secret it would retaliate if the United States leveled tariffs on Chinese goods.
China made good on its promise last July, matching a 25 percent tariff on $34 billion of U.S. imports.
Soybeans took the brunt of the retaliation, with prices sliding as much as $2 per bushel.
China has all but spurned the United States thus far this marketing year, purchasing less than 5 million metric tons (mmt) compared to 35 mmt the previous year. Ample soybean supplies in Brazil and Argentina coupled with a decline in soybean meal demand in China caused by diseased swine have sealed the U.S. farmers’ fate.
“Most U.S. soybean trade with China is done between November and March,” Leeds said. “Politics have gotten in the way and it’s unlikely we’ll make up the lost ground as South American farmers prepare to harvest another large soybean crop.
“We’ll be lucky to reach 10 million tons of soybeans exported to China,” Leeds added. “With all due respect to the president, this isn’t the best of times for U.S. soybean farmers.”
Backed by the soybean checkoff, U.S. soy leaders have been working the telephones and redeeming frequent flyer miles to make additional sales to new and emerging markets. They include the European Union, Egypt, Africa, India and Southeast Asia.
Despite an uptick in soybean exports to destinations other than China, U.S. farmers continue to lose ground with the absence of its number-one customer.
“There’s been long-term damage done between the two countries,” Leeds said. “Even if the dispute is resolved, we’ll be lucky to get 50-60 percent of our market back. China will never allow itself to become that dependent again on the United States.”
Contact Aaron Putze at email@example.com.
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