Trump tariffs on China intensify pain for US soyabean farmers

Trump tariffs on China intensify pain for US soyabean farmers

As Donald Trump raised tariffs to 25 per cent on $200bn worth of Chinese imports last week, the US president declared he would use the proceeds to buy up surplus agricultural products and ship them to “starving countries” as humanitarian aid. The US agriculture department soon announced it was readying a plan.

  In late February, with American and Chinese diplomats enmeshed in trade talks a week before a since-extended deadline, a top US agriculture official explained what he hoped would result from a deal.

“I think we’ll see free, fair and reciprocal trade,” Ted McKinney, undersecretary for trade and foreign agricultural affairs, told reporters.

If free trade is the goal, the White House is taking a roundabout route. As Donald Trump raised tariffs to 25 per cent on $200bn worth of Chinese imports last week, the US president declared he would use the proceeds to buy up surplus agricultural products and ship them to “starving countries” as humanitarian aid. The US agriculture department soon announced it was readying a plan.

The proposed state crop purchases pushed agricultural markets further into uncharted waters a year after the dispute flared between the world’s two largest economies. Soyabean futures in Chicago settled below $8 a bushel on Friday, the lowest level in more than a decade, reflecting their importance as the top US agricultural export to China.

US soyabean shipments to China effectively dried up last autumn after Beijing hit them with a 25 per cent tariff. Since December, when trade talks restarted, China committed to buy 20m tonnes in a sign of goodwill. About 5.6m tonnes have since left US ports.

Another 7.4m tonnes have been sold but not yet shipped. Farmers now fret that China will cancel the sales.

The new US tariffs are “going to extend this trade war,” said Bill Gordon, who farms corn and soyabeans on 2,000 acres in southern Minnesota. “We’re already bleeding. It’s going to prolong that haemorrhage and not a lot of us are going to be able to make it.”

Recognising the farmers’ plight, the US government last year authorised a $12bn bailout programme that included up to $7.2bn in payments for soyabean growers. The US also approved the purchase of $1.2bn of foods for donation to domestic charities.

                US soyabean stocks left over before harvest will more than double year-on-year to 27.1m tonnes before the next harvest, the USDA said in monthly supply and demand estimates last week. A year later, in August 2020, stocks are likely to remain a stubbornly high 26.4m tonnes – four times the average over the past five years.

As a practical matter, cutting down this multimillion tonne soyabean surplus by donating it to foreign countries would be a monumental task. In fiscal 2017 the government gave a total of 1.8m tonnes of food commodities to recipients in 63 countries including Nigeria, South Sudan and Yemen, accorDing to a report to Congress last month. Almost half the shipments were wheat.

Most of the yellow soyabeans grown by US farmers are not ingested by people. Instead they are crushed at industrial processing plants into animal feed and vegetable oil.

“I don’t think that any food aid recipient in the past needed, or in any way was in the market, for soyabeans,” said Abdolreza Abbassian, grain analyst at the UN Food and Agriculture Organization in Rome.

                Paul Dorosh of the Washington-based International Food Policy Research Institute (IFPRI), said that some soyabeans are processed into a food product for malnourished babies and young children, but the volume of this so-called corn-soyabean blend was “tiny.”

The US had already committed $3.5bn to food aid this year under the Food Assistance Convention, an international agreement. Among the convention’s principles are one advising members to “purchase food and other components of food assistance locally or regionally, whenever possible and appropriate,” as opposed to importing food from overseas.

US federal law also requires an analysis of whether the receiving country would be able to store the inbound foodstuffs, to prevent them from rotting, and for the US to assess whether the aid would undermine local farmers, according to a report by the Congressional Research Service.

                Rival agricultural exporters could raise objections to any programme as export subsidies, which are banned under World Trade Organization rules, experts said.

“Finding an appropriate outlet in terms of food aid that wouldn’t depress local markets of recipient countries and could be well used — that would be very difficult,” said Mr Dorosh, director of IFPRI’s development strategy and governance division.

China has more leeway to abandon the US soyabean market at this time of the year because big crops are being gathered in Argentina and Brazil, the two leading South American producers.

Meanwhile, the spread of African swine fever is decimating China’s pig herds, wiping out 42m tonnes of soyabean import demand over the three years to 2020, the USDA’s Foreign Agricultural Service said in a note. “African swine fever in China will be a game changer for the global oilseed complex, and soyabeans in particular,” it said.

The toll of the outbreak has lifted prospects for meat producers hoping to supply China. The National Pork Producers Council, a US pig farming group, embraced Mr Trump’s envisaged food aid package, arguing that pork “should help people in need who otherwise would not have access to this high-quality US protein”.

 

Other farmers are less effusive.

“‘Farmers do not want a handout from the government,” said Mr Gordon, who is also vice-president at the American Soybean Association, a trade group. “We raise a product and want a fair price for it. Let us compete.”

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