Banking & Finance, Food Service & Agriculture, and Government

Soybean farmers feeling the weight of tariff war

Prices plunge as US, China continue feud.

June 7, 2019
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Experts predict an overstock of soybeans this year could lead to a smaller harvest next year as farmers turn to other crops. Courtesy iStock

Michigan soybean farmers are feeling the impact of the tariff feud between the U.S. and China.

Alan Moore is on the board of directors for the Michigan Soybean Promotion Committee and the owner of Moore Seed Farm LLC in Bannister.

His family farm is 2,000 acres, and Moore said about 40% is used to grow soybeans. Corn, triticale and wheeler rye are grown on the other 60% of the farm. Moore said although he exports rye to Japan, the soybeans he grows are used domestically for feed.

Nonetheless, he said the tariff impact trickles down and disrupts the market.

“When you talk to a Chinese consumer, they want quality products at a competitive price, and we are not competitively priced at the moment,” he said. “It is a world market, but it has affected the price here domestically, too. Typically, prices have been around $9 to $10 per bushel, but now it is closer to $7.50 to $8. (It) doesn’t seem like a lot, but that is a pretty big percentage in a thin margin economy. It has been pretty hard on the agri-economy because (soybeans) are the one thing that they buy from us a lot; everything else we buy from them.”

The U.S. is the largest producer of soybeans in the world. China is the U.S.’s largest export market for soybeans. According to the Michigan Department of Agriculture and Rural Development, over $12.2 billion of soybeans were exported to China in 2017. In 2018, $3.1 billion of soybeans were exported to China.

The decline in soybeans export to China is, in part, because of a slew of tariffs that each country has placed on the other, including a 25% tariff that China placed on U.S. soybeans in 2017.

As of March, about $1.69 billion of soybeans have been exported to China this year. That number is set to increase as farmers are in the midst of the planting season. Farmers will not begin to harvest the crop until around September.

In reaction to the tariff war between the two countries, Moore said Michigan farmers may plant fewer crops this year, although the U.S. has been making gains in other markets, such as Europe and some Asian countries like Vietnam.

However, he admitted that it is not enough to offset the number of soybeans that were being purchased by China.

“A good share of soybeans gets sold to the elevator system like Zeeland Farm Service or Michigan Agricultural Commodities,” Moore said. “So, (farmers) can get rid of the soybeans, but it is just the price that is a major problem. There are a lot of them just sitting in bins at the moment. I think there will be less beans planted this year, maybe a little bit, I don’t know. That is going to be hard to tell because there are not a lot of good options that we have either.”

The production of soybeans in the state has increased over the last two years, despite the struggle soybean farmers are having to sell their soybeans at a competitive price.

In 2018, Michigan farmers planted 2.3 million acres of soybeans and about 2.28 million acres of soybeans were harvested, which amounted to 48 bushels per acre. The industry produced 109.4 million bushels that were valued at about $941.2 million.

In 2017, 2.28 million acres of soybeans were planted and about 2.27 million acres of soybeans were harvested, which amounted to 42 bushels per acre, for a total production of 96.4 million bushels.

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