WATERLOO – While soybean farmers welcome news of the first phase of China-U.S. trade agreements that were signed at the White House on Wednesday, the Iowa Soybean Association officials say impacts of the tariff war are not over and plans are still in place to seek other markets.
It’s “just the first step on a long journey to restoring nearly two years of lost sales to the world’s No. 1 soybean buyer,” said ISA President Tim Bardole. “America is now a residual – rather than primary – supplier to a country of 1.4 billion people.”
For the past year, the world’s two largest economies, the U.S. and China, have been slapping each other with tariffs in a trade war. Trump imposed tariffs on more than $360 billion in Chinese imports, including farm equipment, and China retaliated with tariffs on more than $110 billion worth of U.S. goods, including agriculture products.
Trump met with Chinese officials, who purchase 60% of the world’s globally traded soybeans, to formalize the agreement that took effect Dec. 15, when the U.S. agreed to cancel plans for tariffs on another $160 billion in Chinese goods. The phase-one agreement also calls for the U.S. to cut the 15% tariff rate it imposed on $120 billion of Chinese goods Sept. 1 in half, and for China to buy an additional $200 billion in American goods and services over the next two years.
The deal calls for $32 billion of that in U.S. ag products, but does not specifically mention soybeans, said ISA Director of Market Development Grant Kimberley, noting the U.S. is already halfway into the marketing year for the 2019 harvest season.
And China has not announced a reduction in tariffs on U.S. agriculture products, which will make the extra purchasing difficult because China has always preferred competitive prices, Kimberley said. Other tariffs will remain in place while the two sides negotiate a phase-two agreement.
“It’s going to be a challenge, the market proved that with the way its traded today,” Kimberley said. Markets traded at $8.63 in Northeast Iowa today, down from $8.77 yesterday.
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In 2017, before the trade war, U.S. ag exports to China totaled $24 billion a year, and the largest amount, a record $13 billion, was soybeans, which translated to about 36 million metric tons of soybeans.
Once the trade war began in mid 2018, that number dropped to 27 million metric tons and down to 13 million in 2019.
China then turned to other parts of the world for soybeans, including Russia and South America, which are set for a record-harvest season in the coming months.
Soybean prices dropped this week as futures were pressured by better than expected weekend rains in drier areas of southern Brazil, according to Progressive Farmer.
“That’s world competition we have to work through,” he said. “It would take the Chinese purchasing only from us for the rest of the year at a premium, so we’ll have to wait and see.”
Building relationships with other parts of the world for expanded markets continues to be a priority for the ISA as well as working to increase domestic markets as well.
ISA leaders and some Iowa farmers leave this month to meet with key soybean buyers and processors in Bangladesh and Pakistan, who purchase about $4 million worth of soybeans per year, Kimberley said. It will be the first time they meet in person with those countries.
“There’s some exciting things happening,” he said.