Why Lower Soybean Prices May Not be Bad for the Economy

(Excerpt from MinnPost)

President Trump imposed tariffs on $34 billion of imports from China last week, and China immediately retaliated by imposing tariffs on an equal amount of imports from the U.S. Since the administration announced the tariffs in March, commodity markets anticipated that China would hit U.S. soybeans with tariffs, and thus soybean prices have fallen by about 28 percent since March.

Soybean farmers clearly lose in this scenario. For example, Michael Petefish, president of the Minnesota Soybean Growers Association, told NPR that the tariffs would cost him “close to $250,000” this year. Petefish compared his position as a soybean farmer to being “a pawn in a high-stakes chess match.”

On the other hand, winners include American companies that use soy as an input to their production processes. For example, producers of soy milk, soy meal, and soybean oil will pay less for raw soybean and thus they can either continue to sell their products at their current prices (and increases their profits) or cut the price of their products to benefit consumers.

Complete story available here.