As we’ve noted on several occasions, the long-term impact of a trade war wouldn’t have a significant effect on soybean prices. In the short-term, however, here’s how much it would cost farmers.
Rabobank reported this week that U.S. soybean prices on farmers would decline by 4% to 5% in the short term should China introduce tariffs on the agricultural commodity. The firm’s analysis was based on the assumption that China would cut its U.S.-originated imports by 100,000 MT.
Rabobank notes – as we’ve said several times – that U.S. soybeans would eventually find a home (of course, we need the U.S. Soybean Export Council to get moving). The bank included Mexico as a likely destination, thanks in part to rising demand from its livestock industry.
The bank projects that such a shift would likely push U.S. plantings back in favor of corn.
China cannot afford to simply cut out the U.S. from its plans, particularly at a time that its livestock industry is turning around and consumer demand for meat and pork is surging. Brazil exports 74% of its soybeans to China already, and it could probably increase – at best – its exports by another 8 MMT. That isn’t going to be enough for China.
China has already targeted 128 U.S. products for possible retaliation in relation to Trump’s recent announcement of up to $60 billion in tariffs on Chinese goods. Soybeans weren’t listed, and it would be very surprising if they do so now given the origination constraints.
If China Strikes Back – Potential Implications for U.S. Food & Agribusiness
After the U.S. government announced a package of trade sanctions on Chinese imports of around USD 60bn, China announced it would retaliate by targeting several U.S. agricultural products. So far, China has said it would impose a 25% tariff on pork and a 15% tariff on nuts, fruits, vegetables, and wine. At this point, the picture is not complete yet, but we can begin to evaluate the potential consequences based on current information.