March 9 – The China “Retaliation on Soybeans” is Deafening. Here’s What to Do.

Will China retaliate over President Trump’s decision to put tariffs on steel and aluminum? The more important question: Who cares?

On Wednesday, the Wall Street Journal set off a firestorm of chatter across Washington D.C. Will China retaliate over President Trump’s decision to put tariffs on steel and aluminum? The more important question: Who cares?

The Journal didn’t tell us anything new. It simply whipped up concerns that China may place restrictions on soybeans. That story trickled over into regurgitations of the commentary in The Hill, a newspaper that details and effectively celebrates Washington politicians celebrating themselves.

A few things that we want to unpack from this story.

First, we know that China placed restrictions on U.S. sorghum in January. That was a serious concern to farmers across the Midwest. The U.S. export of sorghum to China was basically non-existent a few years ago. But farmers piled into this trade because of the solid premiums that they could obtain by shipping to the export market. Now, those premiums have dried up as importers have stopped making orders while China sorts out its policy on the matter.

But sorghum is more of a specialty. It doesn’t carry the same level of trade on the global market. With soybeans, I don’t buy the argument soybean restrictions will be the end of the world. There could be a short-term price reaction (particularly if people are taking recent gains off the table).

Second, if the Soybean Export Council is doing what its name implies, we will be able to fill demand in new markets created when the paper shuffle of soybean shipments ensues. We might see some speculators play that angle as they try to squeeze every cent they can out of the market.

But in terms of trade restrictions, let’s be clear. We’ll see new markets open if China originates soybeans from elsewhere, but ends up driving up their own feed costs.

If we recall 2009, the Obama administration put tariffs on tires, and China responded by restricting access to U.S. chicken exports. It ended up being a massive bust. We just ended up selling a ton of chicken to Hong Kong. It is considered by a lot of people to be one of the worst modern efforts at retaliation.

Finally, there are more important issues for U.S. farmers.

These trade concerns are outside of the soybean complex.

My bigger trade concerns are the possibility of a massive uptick in Mexico’s sourcing of corn from Brazil due to lower costs and NAFTA rattling.

We also worry about U.S. wheat losing its dominance in Japan due to our decision to depart TPP and give Australia and Canada a $65/tonne advantage in that market.

We’re riding this out and ignoring the tariff noise for now.


U.S. Soybean Farmers Fear China Will Retaliate for Steel Tariffs

China’s appetite for U.S. soybeans has waned, and concerns abound that exports of the legume could suffer further if President Donald Trump makes good on a promise to impose tariffs on imports of steel and aluminum.

Farmers and grain traders worry that China might retaliate by slowing imports of U.S. beans or by erecting trade barriers to them.

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About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.