An Urban's Rural View

China isn't buying any new-crop U.S. soybeans and it's easy to understand why. As part of the crossfire in the latest battle of the U.S.-China trade war, China imposed a 20% retaliatory tariff on American beans. Actually, it's more like 34% after including various taxes.

China, then, naturally prefers to fill its considerable soybean needs from Brazil. American growers are left praying their president will make a deal restoring Chinese purchases of their product.

There's reason to hope for that. The two countries are talking again. There's even chatter about a Trump-Xi summit. After the agreement in 2019 that ended the first battle in this war, China increased its purchases of U.S. farm products in 2021 and 2022. The increase wasn't as much as promised, but it was significant.

The quadrupling of soybean purchases President Donald Trump has urged on China is a pipedream, however. Depending on the base year, a quadrupling could put the U.S. ahead of Brazil as China's principal supplier of beans. There's very little chance of that happening.

To understand why, it's helpful to review some history -- and review it from China's point of view. So, imagine that for the last few decades you've been the Chinese official in charge of agriculture.

You have 1.4 billion mouths to feed. Your country produces more food than any other -- almost a fifth of the world's wheat, a quarter of its corn, 30% of its rice and half of its vegetables. Of some products you produce more than enough; you're a major agricultural exporter.

Yet food security is still a concern. Protein is one issue. Your people's demand for meat and dairy products has risen. You raise half the world's pigs but still import pork.

And you need a lot of animal feed.

Growing animal feed takes land, and despite having a bit more total land than the U.S., your country has 120 million fewer arable acres. You're trying to feed 35% of the world's population with only 7% of its arable land. You don't have as much water as you need, either.

You're trying hard to produce more. Your country invests twice what the U.S. does on agricultural research. And, just in case, you've built up big food reserves.

Still, you have to import a lot of animal feed, especially soybeans. You need beans for cooking oil as well.

Your challenge is how to import the agriculture products your country needs consistent with a high priority on food security. What's your strategy?

Way back when, your answer was diversification. Depending too heavily on any one country is risky. What if there's a crop failure? What if a political squabble tempts the country to cut you off? It seemed especially risky to depend too heavily on a country as powerful the United States, which has multiple ways to hurt China.

Yet back then the U.S. was the country with the greatest capacity to meet your voluminous needs. For many years it was your preferred supplier.

To diversify, you needed to encourage another potential supplier to expand production. Brazil was the obvious choice. The Brazilians had a lot of cerrado land that could be planted in soybeans.

They didn't disappoint you. Eyeing that big potential market in China, they planted and planted. Over time, Brazil overtook the U.S. as the world's biggest soybean producer.

Nor is Brazil done expanding. On top of the nearly 120 million acres planted to soybeans now -- nearly 35 million more than the U.S. -- Brazil has another 70 million cerrado acres.

So now you have two big potential suppliers. One is your rival for world supremacy, a country you've been at loggerheads with over trade issues for years. The other is the world's biggest producer of the product and a country you have warming diplomatic relations with.

Not a hard call, is it? Brazil is your preferred supplier. During the last 20 years or so, Brazil's exports of soybeans have quadrupled, mostly thanks to you. You're their big customer.

Brazil runs a big trade surplus with China. You don't mind. Food security is worth a trade deficit -- and your country runs big trade surpluses with more than enough other countries to compensate.

Not only are you buying from Brazil, you're helping solve one of Brazilian agriculture's biggest problems: getting product to export markets. Your countrymen are developing an enormous export terminal at Santos near Sao Paolo and railroad lines that could someday move soybeans from Brazil to a Chinese port in Peru. (https://www.wsj.com/…)

Of course, even if Brazil could supply all your needs you would continue to buy from other countries, including the U.S. You don't want to rely totally on any one supplier. You would no doubt resume significant purchases from the U.S. in exchange for tariff reductions on your exports of manufactured products.

Not a quadrupling, though. You are very comfortable with Brazil as your permanent preferred supplier.

Urban Lehner can be reached at urbanize@gmail.com

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