These Are the Farm Commodities China May Target in Trade Dispute
Date: Monday, March 26, 2018
Now that President Donald Trump has announced punitive tariffs on Chinese goods, attention has switched to possible retaliatory measures. U.S. agriculture is a clear and obvious target.
U.S. farmers export more produce to China than any other country. By hitting commodities such as soybeans and pork with tariffs, China would also be singling out products grown in the American rural heartland, a key constituency that helped elect Trump. Here’s a brief rundown of what may be at risk.
This humble oilseed is of huge importance to China, where it’s used as animal feed and in a wide variety of foods and household goods. The soybean trade is also vital to U.S. farmers: a third of their production, valued at $14 billion annually, goes to China, according to the American Soybean Association.
Targeting soybeans is clearly on the mind of the Chinese government. This week an editorial published in the Global Times, a newspaper affiliated with the ruling Communist Party, railed against alleged soybean dumping.
Should China pull the trigger, the implications for U.S. soy farmers could be severe. "The tough line the administration is taking on China will lead to retaliation that will cost many farmers their livelihoods," the soybean association said Thursday.
Yet despite plenty of supply from Brazil and Argentina, China is such a big consumer that it’s unlikely to be able to entirely wean itself off U.S. soy. The country’s imports are projected by the U.S. Department of Agriculture to rise to a humongous 100 million metric tons in the next crop year -- that’s more than a quarter of total current global production.
The U.S. exports about a fifth of its pork production, and China -- the world’s largest consumer of the meat -- is among the largest buyers. The U.S. shipped about 309,000 metric tons to China last year, USDA data show. Combined with Hong Kong, it ranks second, behind Mexico, according to the U.S. Meat Export Federation.
U.S. pork could be an “easy target," according to a report this week by analysts at Vertical Group. China’s purchases have waned in recent months as its domestic hog herd expands and pig prices drop. More broadly, the country has ambitions to become more self-sufficient. In 2013, Smithfield Foods Inc., the U.S. pork producer that’s also the world’s largest, was acquired by Hong Kong-based W.H. Group Ltd.
The fiber represents another massive trade flow from the U.S.: exports of raw cotton fetched $5.8 billion last year, government data show. China was the top destination after Vietnam.
Still, the cotton market is less concerned about possible duties than it is about the overall threat posed by a trade war, according to Peter Egli, the Chicago-based director of risk management for Plexus Cotton Ltd. Disruption in the soybean trade could spur U.S. farmers to grow more cotton instead, increasing supplies and curbing prices, he said.
China is the largest market for U.S. alfalfa hay, accounting for about 44 percent of total shipments over the past three years. Hay exports comprise a big part of agriculture in California, Washington and Idaho.
The growth in shipments to China has been driven by changing production practices in the country’s dairy industry. An increasing number of dairy cows are being raised by large, modern farms that prefer imported hay and commercial feed. The Chinese government last year announced a plan to promote the planting of hay to increase domestic supplies by 2020.
President Xi Jinping’s government has already begun an investigation into imports of American sorghum. Prices of the grain, which is commonly used to feed livestock, have been on the slide recently amid uncertainty surrounding China, said Tim Lust, chief executive officer of Lubbock, Texas-based National Sorghum Producers.
Click here to read the entire article from the original source.
Have the News Delivered to you
Like what you see here? Why not let us send it directly to you?
Sign up to receive our Weekly Industry Newsletter, a compilation of all news articles that matter to you and your business.