Disappointing crop data released from the US this week suggested that harvests of soybeans may be lower than expected, prompting prices of the valuable crop commodity to rise.
As the trade war between China and the US continues to escalate further, the fact that China is the biggest importer of US soybeans at present is adding to volatility in the market. Soybean prices have held close to multiyear lows, although futures saw a jump on Tuesday.
Rising near 1% at USD $8.90 a bushel, the price change came as the Department of Agriculture confirmed that estimates for the nation’s crops were below what the market had estimated. It suggested that a poor autumn harvest could be on the way, which would be a significant blow to the large number of farmers in the US relying on exports of their produce for a good portion of their income.
The last couple of months have seen heavy tariffs traded back and forth between the US and China, and a large 25% tariff on some USD $34bn worth of Chinese goods led to retaliation, with soybeans included in countermeasure tariffs on a similar value of goods.
China has been looking to source its soybeans from other exporters and has turned to Brazil and other countries in the meantime. However, analysts from Oil World said in a press report that they did not expect import taxes to be enough of a barrier for China to not purchase soybeans from its current economic rival.
Last week, the word from Beijing was that if US President Donald Trump decided to double tariff rates to China with regard to soybeans, it would respond with tariff measures of USD $60bn upon the US.
Farming economists are not expecting to see resolutions come to fruition anytime soon. Kevin McNew, an economist from Farmers Business Network, said that “the market is losing faith” in any positive happenings.
The tariff measures have had a significant impact on farmers in the political belts that voted for President Trump, and with midterm elections on the way in November of this year, the Department of Agriculture has rolled out an emergency aid package to the tune of USD $12bn to help stem any damage from foreign policy decisions.
This would include payments directly to farmers as well as the promotion of trade overseas and government confirmation that it will buy up any surplus stocks to help maintain the value of the crop.
McNew suggested that these implementations are nothing more than a bandage applied to the economy and that they seriously indicate that any real solutions are unlikely to take place in the near future.
John Heisdorffer, President of the American Soybean Association, said that supplementary measures could well work for now, but the only way to achieve long-term stability and growth in the market is to agree to reduce and remove protectionist policies.
Highlighting the key concern of requiring “certainty and stability” for the soybean industry, he said that “negotiating trade agreements and funding programs” is necessary for resolving the current difficulties facing many farmers in the US, who rely heavily on exporting their goods. Heisdorffer also demanded that the tariffs lift as quickly as possible and that the government intervene to help open new markets of trade to offset the damage that has already set in.