China’s announcement that it will stop buying U.S. farm products is yet another setback for farmers already weary of a trade war that’s dragged on for more than a year.
“We need to find an end to this very soon, because it’s not sustainable for us much longer,” Darin Johnson, a corn and soybean farmer near Wells, Minn., said after the news Tuesday.
“China is a large customer of ours and has been in the past and we’ve worked very hard to keep their business. At this stage, we’ve lost a big portion of it and we honestly can’t afford to lose any more,” Johnson said.
President Donald Trump said last Thursday that Beijing had not fulfilled a promise to buy large volumes of U.S. farm products and vowed to impose new tariffs on around $300 billion of Chinese goods, abruptly dimming prospects of a trade deal.
China’s Commerce Ministry responded on Tuesday, saying it will halt purchase of U.S. agricultural products.
American Farm Bureau Federation President Zippy Duvall called that announcement “a body blow to thousands of farmers and ranchers who are already struggling to get by.”
Some executives wondered if China can divorce itself entirely from U.S. food production.
“While it seems unlikely that China can completely avoid purchases from the U.S., soft demand and strong global grain production allow for increasing pressure on our farmers,” said John Griffith, senior vice president for global grain marketing and renewable fuels for CHS Inc., the giant agriculture co-op based in Inver Grove Heights.
Trump reacted to the news with a tweet that indicated he’ll support another year of special subsidies for farmers who are hurt by China’s move. “China will not be able to hurt [farmers] in that their President has stood with them and done what no other president would do,” Trump said, stopping short of directly mentioning the aid payments. “And I’ll do it again next year if necessary!”
Chinese tariffs of 25% on soybeans — levied in response to U.S. tariffs on steel and other metals last July — had been the heaviest blow dealt to U.S. farmers in the trade war. Minnesota is the third-largest producer of soybeans, behind Iowa and Illinois, and about one-fourth of all U.S. soybeans were typically exported to China before the trade war. By dint of access to shippers on the Pacific coast, many of Minnesota’s soybeans are grown for the Chinese market.
Tariffs on pork have also hurt U.S. farmers, but some pork exports were getting through. The latest turn in the trade war casts doubt that even that will happen.
Chinese imports of U.S. farm products last year dropped from $19.5 billion in 2017 to $9.1 billion in 2018, according to the American Farm Bureau. Soybean prices fell last summer and never recovered. They’ve dipped again in the past week with the latest escalation of the trade war, down 36 cents to $8.50 per bushel on Tuesday.
Johnson, the farmer near Wells, said these trade negotiations “have been needed for a long time,” but they’re taking too long to get resolved.
China is the world’s largest buyer of soybeans, and U.S. soybean growers have been the chief recipients of the aid in what the U.S. Department of Agriculture calls the “market facilitation program,” (MFP) meant to alleviate the pain of the trade war. The majority of the $8.6 billion in aid paid in 2018 went to soybean farmers.
“We appreciate the MFP payment but we’d much rather have trade than aid,” Johnson said. “We have customers out there that want to buy our product and we want to sell to them.”
Farmers can start applying for a second round of trade aid this month. The cost of the second bailout could be as much as $14.5 billion.
The impasse with China is perhaps even more frustrating for hog farmers, given how much African swine fever has decimated swine herds in China and high demand for pork there, said Dave Preisler, executive director of the Minnesota Pork Producers Association.
“It’s just plain disappointing,” Preisler said. “There could be such tremendous opportunity.”
Chinese pork demand will instead be met by European and South American hog farmers.
The particulars of the Chinese announcement are not yet clear, Preisler said. Though officially tariffs were imposed on U.S. pork exports in 2018, the reality was “herky-jerky,” Preisler said. Some products — such as a three-piece hog carcass destined for further processing — were getting into China in recent months.
“We do know that some product went there, even despite the tariff,” he said. “But the potential for more is significant.”
Now, it’s anyone’s guess what U.S. pork, if any, will be allowed into China, Preisler said: “I don’t think we know. We know what they say, but then what happens is what matters.”
Reuters contributed to this report.