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Department of Agricultural, Environmental, and Development Economics



May. 9, 2018

Farmers in Ohio have begun planting soybeans just as the trade war with China, the world’s largest consumer of the crop, has reached another nerve-racking point.

Last week, Bunge, the world’s largest oilseed producer, told Bloomberg News that China has essentially stopped buying U.S. soybeans and instead is purchasing soybeans mostly from Brazil. U.S. soybean sales to China are down compared to last year’s total, according to the U.S. Department of Agriculture.

In recent years, China’s demand for soybeans has been strong. China is the second-largest market for U.S. agricultural exports, and the country is Ohio’s most important soybean export market. In 2017, soybeans were Ohio’s largest agricultural export, totaling $1.8 billion.

“China picked a commodity that would do maximum damage to U.S. agriculture and could do political damage to the administration,” said Ian Sheldon, an agricultural economist, who serves as the Andersons Chair in Agricultural Marketing, Trade and Policy with The Ohio State University’s College of Food, Agricultural, and Environmental Sciences (CFAES).

In April, China threatened to impose a 25 percent tariff on U.S. soybeans and tariffs on 105 other American products. That was in response to the tariffs that the administration proposed on a range of Chinese imports valued at $50 billion.

If imposed, a 25 percent tariff on U.S. soybeans would mean companies in China would pay 25 percent more for those soybeans, and the additional money would go to the Chinese government.

China’s demand for U.S. soybeans has been strong as a result of the increase in meat, especially pork, in the Chinese diet. So, having a sufficient supply of soybean meal to feed those livestock is critical.

Even if China were to rely more on Brazil and Argentina, which also supplies soybeans, those countries can’t meet China’s huge demand without some from the United States, Sheldon said.

“The Chinese are going to work hard to fill that gap. Brazil and Argentina can pick up some of the slack, but they can’t pick up all of it,” Sheldon said.

In the short term, the trade war will bring down the world price of soybeans, said Ben Brown, who runs CFAES’s farm management program, which provides farm policy and market information to Ohio farmers and others.

“There is every reason to be nervous about this,” he said.

But Brown agreed that China, being the largest buyer of soybeans in the world, eventually will resume buying U.S. soybeans because the transaction costs involved in China getting soybeans from other countries, including the transportation costs, would make them far more expensive than U.S. soybeans, he said.


Ben Brown

Ian Sheldon