In recent weeks, U.S. farmers have witnessed a welcome sight on the trade front: China purchasing U.S. soybeans.
In late November at the G-20 Summit in Argentina, President Donald Trump and Chinese President Xi Jinping met to discuss the trade dispute. After that meeting, the countries agreed to a temporary truce, allowing for more open trade until a formal deal can be reached.
These friendly reports are a positive step for farmers. However, it may be too little, too late for the marketing year.
“The window for opportunity for sales to China is rapidly closing,” said Kirk Leeds, CEO of the Iowa Soybean Association. “Once the South American crop comes on starting in February and certainly by March, we will once again be the supplier of last resort.
“With approximately a billion bushels of carryover in the U.S., and really six weeks, maybe eight weeks of opportunities left, we would really have to crank a lot of soybeans through the system in a very short period of time to make a major dent in the carryover.”
Despite recent purchases of soybeans, export numbers to China are well behind normal. Leeds noted that in a typical year, China is a market that would import 32 to 34 million tons of soybeans. Recent purchases of close to 3 to 4 million tons are welcome, but simply a drop in the bucket, he said.
“The impact on soybean demand is pretty clear,” said Martyn Forman, an agricultural and applied economics professor at the University of Missouri. “The Chinese have bought a few more beans following the (G-20 Summit in November), but exports are still way down from a year ago.”
Demand dropped after the U.S. and China began imposing tariffs this spring. Trump imposed tariffs on $250 billion in Chinese goods, and China responded with a 25 percent tariff on U.S. soybeans, among other targeted goods.
Corn has also endured the effects of tougher exports.
“It’s hard to put a number on it,” said Curt Mether, president of the Iowa Corn Growers Association. “Some studies have been up to 44 cents, but it’s hard to make that argument. ... It’s hurt the ethanol industry, which in turn hurts the corn industry, but we haven’t suffered as much as the soybean industry.”
The National Corn Growers Association expressed disappointment that corn farmers impacted by tariffs and ongoing trade uncertainty received little relief through the USDA’s Market Facilitation Program, created in August to offer farmers compensation for lower prices caused by trade disruptions. Rates are $1.65 per bushel for soybeans, 14 cents per bushel for wheat and 1 cent per bushel for corn.
“NCGA appreciates the progress the administration has made to advance ethanol, reach a new agreement with Mexico and Canada and move forward on negotiations with Japan, but the benefits of these efforts will take time to materialize and farmers are hurting now,” NCGA President Lynn Chrisp said in a news release Dec. 17. “One cent per bushel is woefully inadequate to even begin to cover the losses being felt by corn farmers.”
The current 90-day truce led to a handful of purchases of U.S. soybeans and corn over the last few weeks, which is something Mether said is a boon for the corn industry.
“Since this pause, there’s been talk about China even buying a little bit of corn,” Mether said. “That would make a huge difference, especially with the mental attitude of people.”
He said his organization is concerned that without a resolution, with the oversupply of beans and damage to the bean market, more farmers could switch soybean acres to corn acres next year in search of a crop that could turn a profit. That could flood the corn market and drive down those prices as well, Mether said.
As farmers wait for resolution, John Kruse, a University of Missouri specialist in ag business and policy, said long-term damage could be unavoidable.
He cited historical instances, such as President Jimmy Carter’s grain embargo on Russia in 1980, saying we haven’t sold significant amounts of wheat to the Russians since. President Richard Nixon’s restricted soybean exports to Japan in 1973 forced the Japanese to turn to Brazil and Argentina, helping launch production in the South American region, Kruse said.
“Usually, in our past experiences, every time we’ve gotten into one of these with a different country, we do typically see some longer term effects,” Kruse said. “Usually we’ll lose some of our market share to other countries when we get into this. Hopefully it’s not a super huge amount, but certainly we won’t get out of this unscathed.”
Despite the uncertainty heading into a new year, there is still optimism for a resolution on the horizon.
“We understand that farmers by nature are some of the most optimistic people in the world,” Leeds said. “Most farmers I talk to continue to hope and are cautiously optimistic that the issues with China can be resolved and we can move forward to restoring some of the normalcy.”