The Chinese market is in jeopardy for American farmers because Beijing plans to introduce a 25 percent tariff on wheat, soybeans, sorghum and other U.S. agricultural products. Because China is the second-largest market for U.S. agricultural exports, the stakes are high. Sorghum and soy are the two agricultural commodities most dependent on Chinese buyers.
China has moved to retaliate against United States tariffs on Chinese imports with a range of proposed import duties – including 25 per cent on US soybeans and other agricultural products such as cotton, corn, and durum wheat – in an escalating US-China trade war. China intended a direct strike at America's heartland, moving to slap an aggressive 25 percent retaliatory tariff against U.S. soybeans, farm country's most valuable export to China last year, worth $12 billion. U.S. government data shows China purchases 62 percent of soy exports. Exports to China represent almost $20 billion annually for American farmers. With farmers already facing a 12-year low in farm income, a trade war with China could have further damaging effects on agricultural livelihoods in many states.
Soybeans were among 106 U.S. products that China said it would hit with tariffs., less than 11 hours after U.S. President Donald Trump's administration targeted 25 percent tariffs on some 1,300 Chinese industrial technology, transport, and medical products. Soybeans are the number one agricultural export for many U.S. states, and a 25 percent tariff will likely hurt many farms. China imports about $40 billion in soybeans a year, which are crushed to make meal for use in animal food and oil for cooking. About a third of its imports come from the United States. China has the world's largest livestock sector and is projected to buy 97 million tons of soy imports in the 2017/2018 marketing year, nearly two-thirds of the world's soybean exports.
Before China announced its anti-dumping probe, U.S. sorghum exports were on track to be the biggest since 2015, led by sales to China, where sorghum is used to feed hogs and make the alcoholic beverage baijiu. Exports to China in 2017 of 4.6 million tons, valued at $836 million, accounted for 80 percent of all foreign shipments, according to USDA data.
TARIFFS ALSO HIT WHEAT GROWERS
U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) believe wheat farmers are also going to get hurt by the Chinese tariffs. "People may not know that China imported more than 61 million bushels of U.S. wheat in marketing year 2016/17, making it our fourth largest buyer in the world," said USW Chairman Mike Miller, Ritzville, Wash. "Farmers across the country have invested a lot of money and time over the years to develop a Chinese market that has great potential to buy even more American wheat.Now that effort is in jeopardy at a time when big global supplies have already pushed farm gate wheat prices down to unsustainable levels." "America's wheat farmers are experiencing several hardships and adding a 25 percent tariff on exports to China for U.S. wheat is the last thing we need during some of the worst economic times in farm country," stated NAWG President Jimmie Musick a wheat farmer from Sentinel, Okla. "Continued drought, low prices and trade uncertainty adds pressure to passing a Farm Bill on time as well as creating uncertainty for producers and lenders. In a trade war, agriculture is always the first target.
CHINA TO TURN TO LATIN AMERICA
American Soybean Association president and Iowa farmer John Heisdorffer believes the proposed tariffs will have a "devastating effect" on soybean farmers and will likely encourage China to turn to countries like Brazil. Analysts in Brazil and Argentina also says the tariffs could force China to purchase more soybeans and soy-based products from South America. Argentina, the world's No. 3 soy exporter, said it was "analyzing the situation."
Chinese buyers are already paying premiums for soybeans from Brazil, which has expanded plantings and export infrastructure and grows a bean prized for high protein content. Brazil supplied half of China's imports last year while the United States shipped about a third of the total or about 33 million tons.China, whose demand for raw materials increased during rapid economic growth the past two decades, is already the top trade partner for countries ranging from Brazil, Latin America's largest economy and the world's top soybean exporter, to tiny Uruguay.
Trump has directed the U.S. Department of Agriculture (USDA) to create a plan to help farmers cope with the financial damage from tariffs. But while the USDA has promised to step in should the latest tariffs be implemented, it has been vague about how that contingency plan might look.