Why China’s plan to levy a tariff on soybeans matters — especially to Minnesota

REUTERS/Andres Stapff
In 2016, the U.S. accounted for $22.8 billion worth of global soybean exports, the most of any country.

China’s plan to levy a 25 percent tariff on imports of U.S. soybeans may come as something of a surprise to most Americans. But to a professor of agricultural economics who studies international commodity markets for a living, the move was not at all unexpected.

Even before the conclusion of the 2016 presidential race, trade analysts were already weighing the possibility that China might impose an embargo on U.S. soybean imports based on protectionist rhetoric from both candidates.

And now that risk of a trade war is reality, and American soybean farmers may be among the biggest losers.

Soybeans are a crucial part of the global food chain, particularly as a source of protein in the production of hogs and poultry.

In 2016, the U.S. accounted for $22.8 billion worth of global soybean exports, the most of any country. Its nearest competitor is Brazil, which exported $21 billion.

Meanwhile, China accounts for the lion’s share of global soybean imports at $34 billion, or two-thirds of the total.

American exports made up about a third of that, or $12.4 billion, making soybeans the United States’ second-most valuable export to China after airplanes.

The importance of China as a market for soybeans has been driven by an explosion in demand for meat as consumers switch from a diet dominated by rice to one where pork, poultry and beef play an important part. Chinese production of meat from those three animals surged 250 percent from 1986 to 2012 and is projected to increase another 30 percent by the end of the current decade. However, China is unable to produce enough animal feed itself, hence the need to import soybeans from the United States and Brazil.

That’s why the tariffs have tremendous potential to hurt farmers in the Midwest. The largest  exporters of soybeans are Illinois, Iowa, Minnesota, Indiana, Nebraska and Ohio, all of which will suffer from the tariffs.

A handful of Midwestern states dominate soybean production in the U.S.
Map: The Conversation, Source: National Agricultural Statistics Service
A handful of Midwestern states dominate soybean production in the U.S.

Not only do farmers stand to lose out by giving up market share to Brazilian farmers, but soybean prices will probably fall as well, hurting incomes and creating a double whammy for Midwest farms.

The ConversationThis is of course why the Chinese chose to place a tariff on U.S. soybeans in the first place. Farmers will hurt a lot, and soybeans are produced in states where many of them voted for Donald Trump. China’s hope, presumably, is that farmers will lobby the administration to step back from the brink of a trade war.

Ian Sheldon is a professor and chair in Agricultural Marketing, Trade and Policy, The Ohio State University. This article was originally published on The Conversation

Comments (10)

  1. Submitted by richard owens on 04/06/2018 - 10:41 am.

    China owns Smithfield Foods

    Smithfield is the largest pork producer in the U.S., according to Successful Farming magazine’s annual Pork Powerhouses® ranking, with 930,000 sows.

    Soybean prices will be depressed if China can find other sources of soy and protein (Brazil will accommodate them).

    In addition, they can export pork to China without penalty, as they are an American company.

    With nearly a million sows, Smithfield’s production can also depress American hog prices if exports dry up.

    Steve King’s racism will be the only reason for any Iowans to vote Trump ever again.

    https://www.agriculture.com/livestock/hogs/chinese-owned-smithfield-will-pay-pork-tariffs

  2. Submitted by Curtis Senker on 04/06/2018 - 12:07 pm.

    When you are the beneficiaries of a $55b/year trade surplus, you don’t have much leverage against those suffering the deficit.

    Too, newly affluent Chinese want their tofu, and won’t mind paying a bit more for it.

    • Submitted by Neal Rovick on 04/06/2018 - 12:51 pm.

      The US businesses that sell $150 B to China may disagree with where the leverage lies.

      And, while I have my doubts whether “grown in the USA” is a selling point for the USA soybeans used in human consumption

      ….Only one tenth of the soybeans used in China is consumed directly as food such as tofu and soy sauce. The other 90 percent is crushed, separating the oil and meal. In China, as elsewhere, the oil is a highly valued cooking oil and the meal is widely used in animal feed rations…

  3. Submitted by richard owens on 04/06/2018 - 01:24 pm.

    What long term thinker would alienate China?

    We ought to be doing all we can to make friends and allies of the Chinese. If China were not progressing as rapidly as they have been doing, their problems would be the world’s problems.

    Comparative Advantage is the economic concept completely misunderstood (or not known at all) by the Trump administration. Trump lives in a world of the past that scarcely existed even then.

    World Peace, if it can ever be achieved, will be accompanied by voluminous world trade and a respect for the fruits of all people’s labor. Is this a mystery to our leaders?

    Furthermore, there is no evidence that a rivalry or “war” of any kind, anywhere in the world, can be “won”. War, in a world of diminishing resources and accelerated technology is already obsolete- e.g. not worth its cost nor its perceived benefit to anyone.

    Somebody make a note to remove some of this presidential power that can destroy international relationships, create brutal Presidential immigrant police and lie, smear and demean people without fear of retribution.

  4. Submitted by LK WOODRUFF on 04/06/2018 - 02:16 pm.

    Make this an opportunity

    This is an opportunity to do things differently!

    The USA has long grown inordinately large amounts of corn, wheat and soybeans.
    Yet none of those crops are particularly good for human or animal consumption???

    So this is an excellent to re-think the ‘system’. To determine what might be better uses of the lands. What else might be grown that will prove more beneficial to the land, and be healthier for consumption. Crop rotation is a proven way to renew the soil.,,and we have depleted, non-productive soils everywhere.

    There is also a massive pesticide usage problem, which is adversely affecting our health and killing our bees…and their demise will cause us to lose one third of our total food supply!

    Furthermore, many years long government subsidies do not appear to have kept up with the times, either. Americans want to eat better. They wan to be healthier. They want more natural, organic foods that taste the way they are supposed to. They want fewer far fewer toxins in the environment.

    So while this certainly isn’t Trump or Big Ag’s goal, it can become the farmers, who by pulling together collectively can forge a new, healthier path that isn’t reliant on old, unhealthy, subsidized ways but provides them with new types of crops and all us with natural, healthier food sources.

    I urge all farmers to stop reacting and gnashing their teeth and come up with a new viable plan.

    • Submitted by richard owens on 04/06/2018 - 04:15 pm.

      Viable means profitable.

      Who will pay for re-tooling a billion dollar industry. The harvesters cost $500,000 as do tillage tractors.

      In this 4th year of break-even prices and operating loans bringing the whole operation into jeopardy–
      The options are limited for any operation that has been built on the cash markets of corn and soybeans.

      Idealism has its place. Our farmers need MONEY.

  5. Submitted by Pat Terry on 04/08/2018 - 09:15 am.

    Shocker

    Here is a man who is a horrible businesman and incompetent negotiator. A man who has failed in nearly every business venture he entered into. A man who would be worth billions more if he had put his inherited wealth into average performing mutual funds instead of his business failures. A man who no longer has any credit available from American and western banks and can only borrow from Russia. A man whose public statements have demonstrated he has little or no understanding of trade, or business, or really of anything relevant to his job.

    Now this man, as president, is hurting American businesses through his incompetence. Why is anyone even the least bit surprised by this.

  6. Submitted by Paul Udstrand on 04/09/2018 - 09:20 am.

    The most common refrain I’ve heard from Rural Trumpsters

    Since the election the media has been almost obsessed with understanding “Trump voters” and I’ve heard a number of interviews with the rural folk who voted for Trump. The most common “reason” given has been: “We just wanted to throw a hand grenade into the D.C. establishment and the government.”

    Well, that grenade is exploding in the laps who them who threw it… and I can’t say I really care a heck of a lot. I used to care, but when you throw hand grenades into my living room because you think a rural-urban divide is going to make our country “great”… again, well let’s just say you get what deserve. The farm bill is stalled, and your exports are in jeopardy… BAM! goes the grenade you threw. Whatever. I’m sure those small guvment Republicans who don’t believe in spending will come to your rescue.

  7. Submitted by Neal Rovick on 04/09/2018 - 11:38 am.

    Trump, this morning….“When

    Trump, this morning….

    “When we do a deal with China – which probably we will, if we don’t they’ll have to pay pretty high taxes to do business with our country. That’s a possibility. But if we do a deal with China, if during the course of a negotiation they want to hit the farmers, because they think that hits me, I wouldn’t say that’s nice, but I tell you, our farmers are great patriots. These are great patriots. They understand that they’re doing this for the country. And we’ll make it up to them. In the end they’re going to be much stronger than they are right now.”

    Don’t worry, he’s going to make it up to you.

  8. Submitted by kzeman Zeman on 04/10/2018 - 05:58 pm.

    Not all farmers will lose

    I’m not sure how the article writer missed the fact that if SB prices fall, livestock farmers (who feed grain) win. Grass farmers will be neutral. So what else is off in this article?

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