Commodities China May Target in Trade Dispute
By Megan Durisin , Marvin G Perez , Shruti Singh , and Jeff Wilson
March 22, 2018, 6:27 PM EDT
U.S. soybean exports valued at $14 billion could be at risk
Other products that could suffer: pork, alfalfa, sorghum
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.
Soybeans
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.
Pork
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.
Cotton
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.
https://www.bloomberg.com/news/artic...-trade-dispute
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