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Grain flow shifts from U.S.-China trade war may last years

23 January 20202 min reading

The U.S.-China trade war has accelerated Brazilian efforts to erode the United States’ share of the world soybean export market, and some of the shifts in global grain flows could last for years, according to executives at CHS Inc, the largest U.S. farmer cooperative. Even with a so-called Phase 1 trade pact expected to be signed in January, uncertainty over Chinese purchases of American farm products - specifically what goods China has agreed to buy, in what volumes and which timeframes - means that some of the profound trade changes that have occurred during the past 18 months are at risk of becoming permanent, they said.

“It’s difficult to believe that we can just rewind the clock, and everything goes back to where we were before,” said John Griffith, senior vice president of CHS’s global grain marketing and renewable fuels, told Reuters in an interview. Such uncertainty is fueling agony across a U.S. farm sector that has suffered from years of falling farm incomes, low crop prices and a glut of grain.

Griffith said while President Donald Trump and one of the largest buyers of American farm goods have been battling it out with tariffs, the map of how foodstuffs flow around the planet has changed.

“New customer connections have been made on the face of the planet, new infrastructure improvements have been made,” he said. CHS has been more acutely impacted by the U.S.-China trade war than many of its agribusiness rivals because the company’s operations are concentrated in northern Midwest and Plains states like North Dakota, which ships the bulk of its soybeans to Pacific Northwest terminals for export to China.

The U.S. government said China would buy an additional $32 billion in U.S. farm goods over the next two years as part of an initial trade deal. China gave no firm commitment on an amount of U.S. goods, but said it may buy more wheat, rice and corn — goods it has not traditionally bought. Soybeans made up more than half of China’s agriculture purchases from the United States in 2017, at about $12.2 billion. China bought about 60% of all exports of U.S. soybeans, the main U.S. export crop by value, before the trade war. Since the current marketing year started on Sept. 1, China has purchased about 10 million tonnes of soybeans worth some $3.5 billion, according to government data. REUTERS

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