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China Trade War Still Hurts Soybeans

An influential skeptic fears long-term damage.

In about two weeks, Kirk Leeds will be visiting China. The CEO of the Iowa Soybean Association has been there 25 times in his three-decade career of promoting export sales for farmers. And he’s still hosting Chinese soybean buyers who continue to visit Iowa, though in smaller numbers since the trade war between the U.S. and China started. Those buyers are still trying to source quality protein for Chinese livestock at a decent price.

“They’re trying to build a career, and we’re all caught in this huge, geopolitical battle,” Leeds says.

So when President Donald Trump and Chinese President Xi Jinping on Saturday announced a truce in the trade war between the world’s two largest economies, Leeds was not exactly euphoric.

“Short term, I think there’s just this general fatigue,” Leeds told Agriculture.com earlier this week.

Like others, he thought it was likely that Trump and Xi would issue a statement after talks at the G20 summit in Japan last weekend. But nothing has changed, except that Trump is holding off on earlier threats to impose tariffs on more Chinese goods. The president also said he had gotten a promise from Xi to buy more U.S. farm products. And the two nations are resuming trade talks that stalled last May.

Initially, U.S. commodity futures traders were skeptical of tangible gains from the trade truce, and grain prices fell on Monday. Just before the July Fourth Holiday, rumors of pending Chinese purchases were a factor in a price rally.

Agriculture has seen other false-starts toward a resolution in the year-long trade war.

“Farmers are getting tired of the ups and downs,” says Leeds, who has been an outspoken critic of Trump’s use of tariffs as a bargaining tool.

Even before the G20 meeting in Japan, China bought 500,000 metric tons of soybeans as a goodwill gesture, but that’s far short of the markets that have been lost.

“There’s so much posturing and gamesmanship going on,” Leeds says.

“Longer term, I am extremely concerned and have been since it started, about the impact on trade,” Leeds says.

The effect of the past year is that we’ve been teaching China, which once bought 60% of U.S. soybeans, to diversify its suppliers of soybeans, he says. China is buying more than before from major U.S. competitors like Brazil and Argentina, as well as from Ukraine.

Meanwhile, the U.S. could struggle to find other markets as big.

“We’re going to have to look at other markets around the world even more aggressively than we have been,” Leeds says.

In the current marketing year that ends August 31, the U.S. has made spectacular gains in soybean exports to the rest of the world. They’re up by 36%, or 7.4 million metric tons, according to data provided by the Iowa Soybean Association. 

But that doesn’t make up for the 19 mmt tons of sales lost to China this year. So far, China has imported about 8 mmt of U.S. soybeans. In the previous marketing year, it bought 28.4 mmt of soybeans.

Leeds doubts that China will buy the 11 mmt of soybeans that would bring sales to the level of a year ago by August 31.

China also needs fewer soybeans with its domestic swine herd decimated by African swine fever. Recent press reports say as much as half of China’s hogs may have died in the viral epidemic. Leeds has heard estimates of a 25% to 30% loss in China’s hog numbers.

Leeds and others in agriculture understand the Trump administration’s motivation for the trade war. China’s theft of intellectual property from U.S. companies has included seed for hybrid corn. It has protected its own farmers and agricultural industries with trade barriers against U.S. farm goods.

“To think that you’re going to use a trade war to cause a fundamental change in Chinese society is unlikely,” Leeds says.

As Leeds looks back on 30 years of work for soybean farmers, he doubts U.S. soybean exports will see the kind of growth they experienced with China as our best customer.

“It’s not like everything was perfect before, but for soybeans, it was a pretty good time,” he recalls.

Now, as talks continue and tariffs remain in place, Leeds’ skepticism grows.

“Maybe I’m wrong. Maybe the president will deliver and happy days are here again,” he says.

“The likelihood of this ending well for soybeans is less and less every day,” he says.

                               

                

                    

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