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commodities trade

‘Someone Go Tell That To The Guy Harvesting His Crops’: Pray For The Soybean Farmers

Whatever you say, sir. 

In case you were wondering, soybean farmers aren’t feeling any better about the worsening trade conflict between Donald Trump, “expert” dealmaker, and Xi Jinping, actual dictator.

Soybeans are of course on the front lines of the dispute, which means some folks are talking about them at the dinner table, and not because they’re an ingredient in what’s on the plates. Rather, because soybean farmers have become pawns in what amounts to a political chess match.

“While [soybeans] initially appear to satisfy the conditions of a rational target for a tariff (the US exports more soybeans to China than anywhere else), it is actually China’s most economically vulnerable import as there is no ‘spare capacity’ in global trade which can be rerouted towards China to compensate”, Goldman wrote last week, on the way to saying that despite the lack of sourcing options, soybeans are a good choice from Beijing’s perspective precisely because they are a “politically relevant good, given the importance of the farm belt in US politics.”

When last we checked in on the incredulous soybean farmer community, ASA President and Iowa farmer John Heisdorffer, was out with a new statement (i.e., a followup to remarks he made back in in April).

“Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports, so the math is simple”, he said, before clarifying things as follows:

You tax soybean exports at 25-percent, and you have serious damage to U.S. farmers.

Given what happened on Wednesday, it should comes as no surprise that soybean futures – already sitting at nine-year lows – took another hit. Notably, one contract fell to a new low, as futures for November delivery dove as much as 2.4% to $8.51 a bushel in Chicago. That would be the lowest since the contract began trading in November of 2014.

Soybeans2

But don’t worry, Trump is on the job despite being preoccupied with the NATO summit.

Here’s what the President tweeted on Wednesday morning, in defense of the palpable angst he’s causing in the agricultural community:

Whatever you say, sir.

Senior administration officials tried to reassure farmers on Tuesday, with one official claiming that “the agricultural community understands they’re not being treated fairly by China either.”

That’s likely to be small comfort in the interim period between now and whenever it is that America declares “victory” in the trade war.

Here’s what Peter Boockvar, CIO of the Bleakley Advisory Group, wrote this week:

Someone go tell the American farmer who will be harvesting their crop in a few months that this is all part of the negotiating process.

On the bright side, farmers will get a chance to express their consternation at the ballot box during the midterms in November.

 

 

 

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3 comments on “‘Someone Go Tell That To The Guy Harvesting His Crops’: Pray For The Soybean Farmers

  1. Error404

    A genuine question – not rhetorical or anything clever……..OK, global soybean trade is apparently tight, but how short- or long-term are the contracts and how easily can trade flows be physically redirected?

    What I’m getting at here is the blindingly obvious possibility that China simply switches sources to Latam, and some of Latam’s former customers shift their buying to the US. I know the real-world is rarely this easy and there would be costs – and bouts of price volatility – to be swallowed, but is this not possible at least in the medium term?

    I’ve not seen this question asked or answered in any commentary anywhere, so perhaps I’ve been speed-reading with my eyes closed or my ‘dumb question proximity’ radar has gone tech. Anyway, just musing.

  2. Anonymous

    Trump seems to be doing a good job of marketing US weapons to NATO.

  3. Anonymous

    These farmers don’t have a thing to worry about. Soon, the government will provide for their welfare in the form of subsidies.

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