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Soybean Farmers Watching G-20

After Months of Buildup, Several Industries Look for US-China Trade Truce

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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China has bought just 339,000 metric tons of U.S. soybeans in the new market year, just 2.5% of the 13.3 million metric tons China bought from the U.S. by the same period last year. U.S. farmers are hoping to see some positive trade news come out of the G-20 talks. (DTN file photo)

OMAHA (DTN) -- As world leaders head to the Group of 20 talks in Argentina on Wednesday, soybean farmers are among those hoping to see some sort of trade truce struck between the U.S. and China.

While trade with China had been a top issue for President Donald Trump in the last several months leading up to the G-20 summit, now events could become overwhelmed with a possible meeting between President Trump and Russian President Vladimir Putin in the midst of Russia-Ukraine aggression.

The trade row continues to weigh heavily on U.S. soybean farmers who may be watching the G-20 talks as much as anyone. The Iowa Soybean Association issued a statement Tuesday from its president, Lindsay Greiner, a farmer from Keota, Iowa, who strongly urged President Trump and Chinese President Xi Jinping "to make the most of the opportunity" by understanding the "real and personal impact of the prolonged trade war on the people you represent."

Greiner added, "Trade wars involving food are a lose-lose proposition. The ongoing dispute between the two governments has turned global trade upside down and artificially distorted market signals, negatively impacting individuals, families and communities."

Greiner pointed to challenges facing the Chinese economy from the trade dispute while U.S. farmers had already seen income cut in half since 2013 even before the tariffs were placed on U.S. commodities and Chinese imports halted.

The trade dispute is also leading to long-term environmental impacts, Greiner noted. Deforestation in Brazil is at the highest level in a decade, with 8,000 square kilometers (more than 3,000 square miles) of Amazon rainforest cut this year, an increase of more than 14% from a year earlier and the highest level of clear-cutting in the past decade. Greiner said Para and Mato Grosso are the states with the highest increase in deforestation. "Not coincidentally, Mato Grosso is Brazil's most prolific soybean-producing region."

Greiner added, "A trade stalemate is bad strategy and ineffective for the people of both countries. The world needs its two largest economies doing business. Make the most of your time in Argentina. Identify solutions and announce a path forward that secures long-term trade that's fair, equitable and reciprocal."

The trade appeared to have some positive vibes regarding the G-20 meeting outcome, as soybeans were threatening to break out of a multi-week sideways trend on Wednesday, said DTN Analyst Dana Mantini. January soybeans were up 16 cents early Wednesday morning.

The Dow Industrial Average and S&P 500 also opened higher early Wednesday with early commentary pegging the higher opening to great expectations in the G-20 talks.

A column by a Rabobank analyst highlighted the risks for U.S. soybean farmers if some deal is not reached. China has been scanning Asia for protein alternatives, including turning to rapeseed meal from India.

"The question for the future will be whether China can source all of its soybean needs outside of the U.S. and how the U.S. will have to change its export structure and plantings to deal with the heavy loss on export shares," wrote Rabobank's Stefan Vogel, global strategist for Grains & Oilseeds.

Here is the link to the Rabobank column:

https://research.rabobank.com/…

China has bought just 339,000 metric tons of U.S. soybeans in the new market year, just 2.5% of the 13.3 million metric tons China bought from the U.S. by the same period last year. Soybean exports overall for the U.S. are down more than 40% from a year ago.

The soybean challenges prompted a Louisiana congressmen to draft legislation seeking changes to the Market Facilitation Program, the trade-aid program that pays farmers for trade losses. Rep. Ralph Abraham, R-La., said changes are needed because there is simply no place for farmers in his state to store soybeans because of the sheer volume of out-of-state soybeans taking up elevator space. Storage has become a problem in several states where farmers are used to taking soybeans directly to the river or rail lines right after harvest for export.

White House officials maintain they have the upper hand in talks with China. Economic Adviser Larry Kudlow said in a press briefing Tuesday that President Trump sees a good opportunity to reaching a deal, but issues over intellectual property theft still remain as major sticking points. Kudlow then cited the strength of the U.S. economy and business investments.

"We're in very good shape," Kudlow said. "China, not so good. I'm not here to critique or second-guess the Chinese economy, but most observers believe China to be in a slump, whereas the United States is in a very strong solid position going into this summit."

Kudlow added, "I'm not suggesting there aren't winners and losers in that game, but on the other hand, I think we are in far better shape to weather this than the Chinese are."

In recent days, Trump also has reiterated his plan to increase the 10% tariffs on $200 billion in Chinese imports to 25% on Jan. 1. Kudlow added that if talks don't go well at the G-20 summit, the president is ready to invoke tariffs on an additional $267 billion in Chinese goods.

"That may not be the first choice. I'm just saying that is his view if we can't get something done," Kudlow said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/BAS)

Chris Clayton

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