Saturday, August 24, 2019

Escalating trade war is bad for U.S. pork industry, which had hoped for more sales to China; grain markets are shut off

Markets Insider chart Aug. 24; click on it for a larger version
American agriculture is suffering again from the escalating trade war with China, and hog farmers are taking the biggest hit. "Pork and beef will face 10 percent higher tariffs as well on Sept. 1," Chris Clayton reports for DTN/The Progressive Farmer. "If the new tariffs go into effect, U.S. pork would face a 60% retaliatory tariff along with a 12% standard duty from China."

That was a blow for the U.S. pork industry, which "has been anticipating even more demand from China because of African swine fever devastating China's hog herd," Clayton notes. The National Pork Producers Council said, "China, the largest pork-consuming nation in the world, is seeking reliable sources of pork as it deals with African swine fever."

China said it would raise tariffs on U.S. soybeans to 30%, from 25%, on Sept. 1. "Corn, sorghum and wheat also will be hit with 10% higher tariffs, but those will not begin until Dec. 15. Tariffs on those crops right now are 10%, and the U.S. has effectively been shut out of the market," Clayton reports. "China had already announced earlier in August that it will stop buying U.S. agricultural products for now," but the moves appeared to affect markets. "November soybeans fell 13 cents on Friday to $8.55 a bushel, and December corn fell four cents to $3.67 a bushel."

"This escalation will affect us not because of the increasing tariff on our sales, which have been at a virtual standstill for months, but through time," said Davie Stephens, president of the American Soybean Association. "The longevity of this situation means worsening circumstances for soy growers who still have unsold product from this past season and new crops in the ground this season, with prospects narrowing even more now for sales with China, a market soy growers have valued, nurtured, and respected for many years."

Clayton notes, "The tariffs hit U.S. agriculture as farmer frustrations have risen over trade, the Trump administration's handling of refinery waivers for biofuels, and a challenging crop year. Future prices for the November soybean and December corn contracts peaked in mid to late June and have steadily declined since then."

The Trump administration has tried to mitigate the damage with billions of dollars in "market facilitation" payments from the Commodity Credit Corp., which can spend $30 billion without additional appropriations. On Friday the Department of Agriculture released its analysis of trade damage to specific crops: $2.05 a bushel for soybeans; 26 cents a pound for cotton; 14 cents a bushel for corn; 41 cents a bushel for wheat; and $1.69 a bushel for sorghum, Clayton reports.

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