Minding Ag's Business

More China Tariff Reaction

The boxing match between the U.S. and China entered Round 2 on Friday as the U.S. issued $34 billion of tariffs on Chinese goods, and China responded in kind. If you recall, the first round took place in April when China responded to U.S. tariffs on steel and aluminum imports with tariffs on sorghum, pork and a number of other goods.

This round is a marked escalation in the trade war, with President Trump saying he's prepared to apply tariffs on up to $500 billion worth of Chinese imports, or essentially everything the U.S. buys from China in a year.

Farmers were mostly unsurprised by Friday's tariffs, urging the White House to find a swift solution to it's trade problems. For a thourough account of what's at stake, please read my news article (https://www.dtnpf.com/…) in addition to the press releases and statements included below.

American Soybean Association: After Months of Asking for an Alternative, Soy Farmers Hit by China Tariff

Soybean growers' requests to back away from tariffs on Chinese goods go unanswered as retaliatory tariff on U.S. beans takes hold

Washington, D.C. July 6, 2018—A soft farm market, already-declining prices, and now, China's retaliation against President Trump's 25 percent tariffs on $34 billion worth of Chinese goods, which took effect at midnight last night. Soybean farmers, whose crop represents 41 percent of the value of products on China's tariff list, will feel the full effect.

The value of U.S. soybean exports to China has grown 26-fold in 10 years, from $414 million in 1996 to $14 billion in 2017. Since talk of the tariffs began back in March, U.S. soy prices have dropped more than $2.00 per bushel.

"Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports," says John Heisdorffer, a soybean grower from Keota, Iowa, and president of the American Soybean Association (ASA). "The math is simple. You tax soybean exports at 25-percent, and you have serious damage to U.S. farmers."

Soy growers rely heavily on exports to China: In 2017, China imported 31 percent of U.S. production, equal to 60 percent of total U.S exports and nearly 1 in every 3 rows of harvested beans. Over the next 10 years, Chinese demand for soybeans is expected to account for most of the growth in global soybean trade, which underscores the importance of this market for future U.S. soybean sales.

When the possibility of tariffs first arose, ASA asked President Trump to consider other policies for reducing the U.S. trade deficit with China. Then ASA organized a fly-in to urge Congress to encourage the Administration to rethink the tariffs. Finally, in a last-ditch social media effort earlier this week, individual soybean farmers who will be directly affected by the trade conflict attached their photographs to statements appealing directly to the President and his advisors.

Iowa Soybean Association: Iowa, U.S. soybean farmers disproportionately impacted by escalating trade war with China

Statement is courtesy of 22 farmers who serve as directors of the Iowa Soybean Association

"The U.S. soybean industry's worst fears are coming to pass today with the implementation of tariffs on Chinese imports. This aggressive action positions Iowa and America's soybean farmers directly in the crosshairs of a full-scale, multi-national trade war if China, as it has promised, imposes tariffs on U.S. soybean imports.

"Short- and long-term consequences are significant. U.S. soybean prices are already far below the cost of production will continue to erode, placing additional pressure on farm families who have already experienced a nearly $2-per-bushel decline since March.

"Long-term, a full-blown trade war risks entrenching anti-American sentiment in a country that consumes nearly 60 percent of global soybean trade and about one of every three rows of U.S. soybean production. It will incentivize additional trading partners, including Canada, Mexico and the European Union, to do business absent the United States. It's clear that our competitors are working diligently to grow their capabilities and overcome any shortcomings, both logistically and economically. This is of great concern to the nearly 42,000 Iowa soybean farmers who derive their livelihood from an industry built on the ability to do business internationally.

"There are winners and losers in every trade war. The soybean industry is a loser if we become a residual, rather than primary, supplier of soybeans to China. Iowa is disproportionately impacted because of the tremendous volume of soybeans produced here and the need to move our product to international customers.

"Iowa farmers are resilient, resourceful and accustomed to dealing with situations out of their control. We recognize and fully appreciate the legitimate issues involving U.S. and Chinese trade relations. As we prepare to harvest another substantial soybean crop this fall, we urge U.S. and China officials to engage in full and transparent dialogue to resolve these issues quickly. Time is of the essence."

Quick facts:

-- U.S. soybean prices are already $1.65 below the average global soybean price.

-- According to a Purdue University study, a 25 percent tariff imposed by China on U.S. soybean imports would result in a 65 percent decline in soybean exports to the country. Total U.S. soy exports would drop by 37 percent while U.S. soybean production would decline by 15 percent.

-- Chad Hart, associate professor of economics and crop markets specialist, Iowa State University Extension, estimates Iowa soybean farmers stand to lose up to $624 million because of higher tariffs implemented by China.

-- Iowa soybean farmers produced $5.2 billion worth of soybeans in 2017 on production of nearly 563 million bushels.

-- Soybeans are America's leading agricultural export, with sales of $27 billion last year.

-- China is the top market for U.S. soybeans, accounting for $12-14 billion in sales in 2017.

-- 51 percent of the U.S. soybean crop is exported annually.

-- As of July 5, 2018, soybean futures prices were trading the lowest they had since September 2008.

Ag Retailers Association Op-ed: Trade Fracas Will Disproportionately Harm US Ag Exports

By: Daren Coppock, President & CEO

American agriculture is rightfully concerned over today's start of an international trade war. Tariffs on Chinese goods announced by the administration have been rapidly countered by China and are focused on U.S. agricultural exports. One of our few economic sectors with a positive global balance of trade -- agriculture -- is being placed at risk as leverage to address other aspects of our trade relationship with China.

According to data from the Commerce Department as of July 6[1], the United States had a total global trade deficit of over $736 trillion dollars in 2017. To no one's surprise, China's share was over $375 trillion in 2017 -- virtually half of the total.

If you look only at the trade balance of agriculture and livestock products, the picture is vastly different with China. United States agricultural products have a positive balance of trade globally, to the tune of nearly $17 trillion in 2017. China's share of that was $15.5 trillion in 2017 -- over 90 percent of our positive trade balance in agriculture was attributable to exports to China. Over the last four years over 80 percent of our positive agricultural trade balance is due to trade with China.

We understand the president's desire to address intellectual and other trade issues with China and other trading partners. We appreciate his resolve in addressing issues which have been overlooked for far too long. There are some serious and longstanding transgressions and unfulfilled commitments that the Office of the U.S. Trade Representative (USTR) has documented[2]. But surely there are more surgical ways to address the issues identified by USTR than the blunt instrument of tariffs.

If the United States loses even a share of its market for agricultural products to China or other export markets, there isn't a farm bill program large enough to mitigate the short-term damage to farmers and their business partners. Despite noble intentions, the Agriculture Department cannot create a program to immediately restore broken trade relationships and reputations, mitigate the damage to input suppliers and grain merchants who serve farmers, or prevent our export customers from finding or creating new sources of supply. We need to remember the lesson of the Nixon soybean export embargo in June of 1973, which caused our buyers in Japan and Europe to seek new suppliers and led to a dramatic expansion of the soybean industry in Brazil. Trade disruptions have serious and lasting long-term consequences.

The administration has some very talented people in key positions responsible for agricultural trade. It is their desire to expand opportunities for US agriculture. Our hope is that whatever trade disruptions occur during these negotiations will be very short in duration, and that American agriculture -- much of which supported Mr. Trump in 2016 and continues to support many of his policy objectives -- will not be offered as a sacrifice to achieve gains elsewhere.

National Association of Wheat Growers & U.S. Wheat Associates: Trade Conflict with China Already Hurting U.S. Farm Families

WASHINGTON, D.C -- From March to June over the past three years, Chinese flour milling companies and their importers purchased an average of about 20 million bushels of U.S. wheat, returning well over $145 million to American farm families and grain handlers. Not in 2018, however. Unable to accept the risk of escalating import prices, Chinese customers stopped making new purchases of U.S. wheat last March, after the Chinese government threaten a 25 percent import tariff on U.S. wheat in retaliation to the threat of U.S. tariffs on Chinese imports.

Today, damage to the livelihood of America's hard-working farm families is no longer just a threat. The exchange of punitive tariffs between Washington and Beijing today represents the next phase of what could be a long and difficult struggle that will likely inflict more pain before we reach an unknown resolution.

U.S. Wheat Associates (USW), the National Association of Wheat Growers (NAWG) and the growers we represent reaffirm our position that unfair Chinese government policies create unnecessary trade distortions that hurt U.S. farmers and other industries. We urged the U.S. government to challenge China's domestic price support and tariff rate quota compliance that led to cases disputing these policies within the World Trade Organization (WTO). These cases served notice to China and our trading partners that the United States was willing to lead a legitimate effort to enforce existing trade rules — by following those rules.

China did not stop importing U.S. wheat in response to these cases, in part because Chinese demand for our high-quality wheat crops is rapidly growing. The unilateral decision to impose tariffs, however, has already had a direct, damaging effect on U.S. wheat growers.

Wheat growers can only hope that the United States and China will stop trading salvos and we call on both governments to come to a resolution quickly. Farmers are eager to move past this dispute and start trading wheat and other agricultural products again soon.

Katie Dehlinger can be reached at Katie.dehlinger@dtn.com

Follow Katie Dehlinger on Twitter @KatieD_DTN



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