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