Soybean growers in the Midwest are caught in the middle of an escalating trade war between the U.S. and China.
China retaliated against the Trump administration’s tariffs on Chinese products Friday by imposing $34 billion in tariffs on hundreds of American goods, including soybeans. Analysts say the added expense of China’s 25 percent tariff on U.S. soybeans will effectively block the product from entering the Chinese market.
Both Missouri and Illinois are among the top 10 soybean exporters. With soybean prices already averaging 15 percent below production costs, Midwest growers are now preparing for the possible repercussions of a trade war.
“If we continue to see prices at this level, farmers will be forced out of business,” said Blake Hurst, president of the Missouri Farm Bureau Federation. “At some point, it becomes difficult to pay your loan back, it’s hard to support your family.”
More than half of exported U.S. soybeans are sent to China, mostly to produce cooking oil and livestock feed.
Though worldwide demand for U.S. soybeans is unlikely to decline in the near future, said Hurst, a trade war may push China and other soybean-producing countries, such as Brazil, to invest more heavily in soybean production.
“Perhaps something needed to be done, but the patience for what’s going on now is starting to wear thin,” he said. “It’s not clear to anybody, I don’t think, what the end game is here, what President Trump hopes to accomplish.”
President Trump has argued the tariffs are necessary to correct decades of unfair trade practices and compel China to change its policies.
How the newly imposed tariffs will ultimately affect U.S. soybean markets remains uncertain, as exporters scramble to find new ways to funnel their product to China.
The potential loss of global soybean markets has sixth-generation farmer Chad Schutz worried. He said farmers have spent the past several decades working to gain access to international markets.
“We have always provided the market with a reliable, safe source of food,” said Schutz, who has about 1,000 acres of soybeans in White Hall, Illinois, 70 miles north of St. Louis. “We just hate to see somebody else come in and take our markets that we’ve worked so hard to obtain over the years.”
Schutz sold contracts for at least half of his soybean crop early in the season. He can store the remainder in grain bins for several months, in the hopes that prices will rebound. If prices remain low, he said he’ll have to sell the rest of the crop at a loss this year.
Despite his concerns, Schutz thinks pressuring China to change its trade practices could benefit the U.S. in the long term.
For him, uncertainty is part and parcel of raising a commodity crop.
“You always know there’s going to be ups and downs in agriculture, you just never know exactly which side you’re going to be on of it,” he said. “As a farmer, I know we have a lot to lose, but I think our country, as a whole, has a lot to gain from it.”
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