FIRST CUT

BRAZIL IS THE LIKELY WIN­NER IN U.S.-CHINA ESTRANGEMENT.

Successful Farming - - CONTENTS -

When the plant­ing sea­son ar­rives in Brazil in Septem­ber, grow­ers are ex­pected to ex­pand the soy­bean area for the 10th year in a row – enough for Brazil to leapfrog the U.S. as the world’s largest grower. Brazil has been clos­ing the gap for years, but the U.S.-China trade war would pro­vide the fi­nal im­pe­tus, say USDA an­a­lysts, who es­ti­mate the Brazil­ian har­vest could be 2% to 3% larger than the crop ripen­ing in U.S. fields.

Mean­while, China and the U.S. would suf­fer from the breakup of the global soy­bean tri­an­gle. For years, Brazil and the U.S. fed the world’s largest im­porter. China won’t be able to re­place en­tirely its usual sup­ply of U.S. soy­beans and will have to pay more for beans from Brazil, said USDA in an ini­tial size-up of the im­pact of tar­iffs on U.S. ag ex­ports. Chi­nese live­stock feed­ers will have to al­ter ra­tions, and con­sumers may see a smaller sup­ply of soy oil, their pre­ferred cook­ing oil.

For U.S. farm­ers, the out­look is larger – pos­si­bly record – stock­piles, smaller ex­ports, and lower prices due to the tar­iffs. Softer U.S. prices al­ready are hav­ing a ben­e­fi­cial ef­fect. Egypt, Pak­istan, and Mex­ico more than dou­bled their pur­chases of U.S. soy­beans, some­what off­set­ting Chi­nese tar­iffs. “Plenty of time and un­cer­tainty re­main in the soy­bean com­plex,” says Farm Bu­reau econ­o­mist John New­ton. The un­cer­tainty about the near term is mir­rored by ques­tions of what will hap­pen in the long run. A UN re­port on global agri­cul­ture pro­jected neck-and­neck soy­bean com­pe­ti­tion be­tween Brazil and the U.S. through 2027, not count­ing the Chi­nese tar­iffs. Four univer­sity economists took a look at the 1980 U.S. par­tial em­bargo of grain sales to the So­viet Union and con­cluded that long-term con­se­quences, such as lost mar­kets or new trade flows, “will likely be the most im­por­tant ag trade story line com­ing out of the cur­rent trade war.” In­tended to pun­ish the Sovi­ets for in­vad­ing Afghanistan, the Carter em­bargo – the fourth U.S. em­bargo or mora­to­rium since 1973 – marked the be­gin­ning of a de­cline in U.S. pre­em­i­nence in the world grain mar­ket and the emer­gence of South Amer­ica as a com­peti­tor. The cho­rus among U.S. farm groups for years af­ter­ward was the im­por­tance of be­ing a re­li­able sup­plier.

Agri­cul­ture Sec­re­tary Sonny Per­due says he’ll de­cide around La­bor Day whether to im­ple­ment an aid pack­age for agri­cul­ture to ful­fill Pres­i­dent Trump’s pledge to shield the sec­tor from un­fair Chi­nese re­tal­i­a­tion. The pack­age would not mit­i­gate all losses, how­ever. “They (farm­ers) can’t pay the bills with pa­tri­o­tism, and that is what we hope to cure.” Per­due said he hoped for a speedy res­o­lu­tion but, “It’s re­ally up to China.”

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