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As Tariffs Bite, China Cancels U.S. Soy Deals and Hunt Is on for New Export Markets
For Iowa farmer John Heisdorffer, the math is brutal in the U.S.-China tariff war. “You tax soybeans at 25% and you have serious damage to U.S. farmers.” China, the No. 1 customer for U.S. farm exports, canceled purchases of nearly $140 million worth of U.S. soybeans just before the two countries imposed tit-for-tat tariffs on each other’s products. Iowa Senator Joni Ernst said on Sunday the Trump administration was working on “a number of new free-trade agreements,” but China “will be a much longer haul.”
Farm groups representing hog farmers, soybean growers, and wheat producers said their members face hard times because of trade disputes with major customers of U.S. exports. The sales usually account for 20¢ of each $1 in farm income. Canada, Mexico, and the European Union, along with China, have put tariffs on ag imports from the U.S.
“We need these trade disputes to end,” said Ohio farmer Jim Heimerl, president of the National Pork Producers Council. The pork council said 40% of U.S. pork exports are under retaliatory tariffs, “threatening the livelihoods of thousands of U.S. pig farmers.” The National Association of Wheat Growers (NAWG) said Chinese millers cut off purchases of U.S. wheat in March when trade tensions surged. The American Soybean Association (ASA) said soybean exports to China, worth $14 billion last year, “will feel the full effect” of Chinese duties of 25%.
Futures prices for corn, soybeans, and wheat declined sharply since late May, partly due to the escalating trade disputes. Cattle and hog futures have been under pressure since March, squeezed by herd expansion and mounting supplies as well as potentially smaller exports
“Here in the Midwest, we believe in trade, not aid,” said Ernst, a member of the Senate Agriculture Committee, on CBS News’ “Face the Nation.” U.S. trade representative Robert Lighthizer indicated he was at work on new trade pacts, to which Ernst said, “I would encourage the ambassador as well as the president to get those done soon so that we can start developing those opportunities for our Iowa farmers.”
In its weekly Export Sales Report, the USDA said China canceled contracts for 15.9 million bushels of soybeans, worth nearly $140 million at current prices, in the week ending June 28. “The move was well expected by the market,” said AgriCensus, a market news agency. More than 1.8 billion bushels of U.S. soybeans have been exported in the current marketing year, with an additional 284 million bushels to be shipped before the sales year ends on August 30. Meanwhile, Chinese buyers accelerated their purchases of Brazilian soybeans, said AgriCensus.
“Soybeans are the top agriculture export for the U.S., and China is the top market for purchasing those exports,” said Iowa’s John Heisdorffer, ASA president. The soy group says soybeans account for 41% of the value of tariffs set by China in response to U.S. tariffs on high-tech imports from China.
Fearing the loss of wheat sales to Japan, NAWG and the trade-promoting U.S. Wheat Associates urged the White House to engage in bilateral negotiations with Japan for lower tariffs, or to join the new 11-nation trade pact that includes Japan, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Known as CPTPP, the free-trade agreement is the successor to the Trans-Pacific Partnership killed by Trump. “We see no other way to stop a situation that we believe will cut already unprofitable cash wheat prices even further,” said the groups.
By coincidence, Japan ratified the CPTPP on Friday, the same day that U.S. and Chinese tariffs took effect. Mexico was the first country to ratify the CPTPP, which takes effect if six nations vote to join it. Under CPTPP, Japan would lower its tariffs on Canadian and Australian wheat to around $85 per tonne, while the duty on U.S. wheat would remain $150 a tonne.
Farm groups have been soft in tone as Trump implemented negotiations for a new NAFTA and announced sanctions on other countries with the goal of bringing down the U.S. trade deficit. The ASA, for example, advocated “other policies” than tariffs to reduce the trade deficit with China, and NAWG noted that WTO challenges to agricultural subsidies and trade barriers in China showed U.S. determination to enforce trade rules. “The unilateral decision to impose tariffs, however, has already had a direct, damaging effect on U.S. wheat growers,” it said.