Will the U.S. Soybean Market be Hurt by Tariffs as Bad as Some Say it Will?

News reports in recent weeks have indicated Minnesota’s soybean industry could be hit hard if China proceeds with retaliatory tariffs. Some say not necessarily.

Most recently, a story in the Star Tribune reported Minnesota’s farmers exported $2.1 billion worth of soybeans in 2016, according to government statistics. Most of them went to China. And if the Chinese proceed with a threatened 25 percent import tariff on U.S. soybeans in retaliation for 25 percent protective tariffs Trump placed on a variety of non-agricultural Chinese products, Minnesota soybean growers and others across the country face a loss of 69 percent of Chinese sales, said Purdue University agricultural economist Wallace Tyner, who analyzed data for the U.S. Soybean Export Council.

Some of those lost Chinese sales can be made up selling U.S. soybeans in other parts of the world, Tyner said. But if the tariffs stay in effect for a long time, U.S. soybean exports to the world could shrink by 29 percent. Brazil, meanwhile, would see its soybean export business grow conspicuously at America’s expense, according to Tyner.

“The short-term price impacts are also serious,” Tyner said. “If tariffs are still in effect [when Americans harvest the soybeans they’ve already planted] and there are beans in bins looking for boats [to ship them abroad], then the price really falls.”

However, some experts including Mark Borrett, don’t believe Chinese buyers will be able to hold out from buying U.S. soybeans, no matter the tariff imposed on them. “They really can’t do without our grain,” he said, according to the Duluth News Tribune.

Borrett, a partner with the LaSalle Group of RCG LLC (Rosenthal Collins Group), spoke in Jamestown, N.D., on June 18 on the global market outlook, and specifically about what’s going on with trade with China.

Borrett told the small crowd that China “picked the wrong time for a trade war,” given the drought in Argentina. “Brazil can only supply so much,” he said.

By mid-August, Borrett expects that most of the Brazil crop will be spoken for, and by harvest time in the U.S., the market will be based on U.S. soybeans.

The best potential for a winter rally in soybeans might be in January, Borrett predicted.

If China can hold out for more than a season, that might lead to some global changes, including more soybean acres in Brazil and the U.S. going back to more acres of corn, he said.

Borrett also addressed crop conditions, which right now appear to be on par for a good harvest. However, he said June crop conditions don’t always correlate with high yield.

“It’s August weather and the first week of September that make yield,” he said. “We all know that.”