WASHINGTON — The United States made good on its threat to raise tariffs on an additional $200 billion worth of Chinese goods. In response, China raised tariffs on an additional $60 billion worth of U.S. goods. Both sides seemed to settle in for what may be a prolonged conflict, with the United States expanding short-term relief to additional growers adversely affected by the trade war and the Chinese soybean and livestock industries adjusting to reduced soybean imports from the United States.
Secretary of Agriculture Sonny Perdue on Sept. 21 announced producers of shelled almonds and fresh sweet cherries may apply for Market Facilitation Program payments at their local Farm Service Agency offices. The M.F.P. is the vehicle created to channel financial assistance to producers adversely affected by the trade war. Signup for the first round of M.F.P. payments began on Sept. 4 (there may be two rounds should the trade conflict continue).
The first round of payments will be based on 50% of the producer’s annual production. If there is a second round of payments, they will be based on the rest of the producer’s annual production.
The U.S. Department of Agriculture forecast payments under the first round of M.F.P. benefits at $4.7 billion with $3.6 billion expected to go to soybean producers. Should a second round of payments, covering the remaining 50% of a grower’s production, be required, new payment rates may be calculated.
The trade war already has had far-reaching impacts for both the U.S. and Chinese agricultural industries, particularly with regard to the soybean trade. In its initial forecast for U.S. soybean exports in 2018-19 issued in May, the U.S.D.A. projected exports at 62.32 million tonnes. By September, the U.S.D.A. lowered its soybean export forecast to 56.06 million tonnes. China has been the No. 1 destination for U.S. soybeans, and while U.S. soybean exports to Europe have increased because of recent low prices, overall soybean exports will fall without the China demand.
The U.S.D.A. in May forecast Chinese soybean imports in 2018-19 at a record 103 million tonnes. The U.S.D.A. since has lowered its forecast for Chinese soybean imports to 94 million tonnes.
Brazil’s soybean exports to China increased as those from the United States dropped. Even before the trade war erupted, Brazil, not the United States, was the largest supplier of soybeans to China. In May, the U.S.D.A. forecast 2018-19 Brazilian soybean exports at 72.3 million tonnes. By September, the forecast was raised to 75 million tonnes.
A common view in the U.S. grain trade has been that China will have no choice but to import some level of U.S. soybeans even with the 25% tariff imposed on U.S. supply. And that may prove true.
At the same time, a view from China was presented at the Global Soy and Specialty Grains Conference in Kansas City on Aug. 29. Mu Yan Kui, vice-chairman, Yihai Kerry Group, and vice-chairman, China National Association of Grain Economy, said, “Many foreign business people and politicians have underestimated the determination of the Chinese people to support the government in a trade war with the United States.”
Mr. Mu acknowledged Chinese overall soybean imports in 2018 and 2019 may be substantially reduced to around 86 million tonnes due to the sharp decrease in imports from the United States, but he said there will be no significant meat price increases in China given measures being taken to address the shortfalls.
Mr. Mu said in anticipation of a trade war with the United States, starting in April 2018, Chinese agricultural industry associations, producers and government began to conduct research to find solutions to soybean supply shortfalls. The resulting plan has six components.
First, the swine and poultry industries in the next several months will adopt lower-protein feed rations, i.e. protein in feed rations will be reduced by about 3.1%.
Second, protein sources will be diversified. Mr. Mu pointed to lifting a ban on crushing canola in the Yangtze river basin, which would allow 2 million tonnes of canola to be imported to substitute for soybeans. China also will seek to increase imports of sunflower seed and meal from the former Soviet Union.
Third, Mr. Mu noted, when the trade war was just around the corner, Chinese buyers “overbought” Brazilian soybeans, which resulted in a temporary glut. Mr. Mu said there would be no soybean shortage before the end of November. By then, more soybeans will have been imported, and, if necessary, 9 million tonnes of soybeans held in domestic stocks could be released.
Fifth, China itself was expected to harvest 14 million tonnes of soybeans this year, and this supply will be available to crushers to ease any tightness.
And sixth, China looked forward to the widely expected continued rapid expansion in Brazilian and Argentine soybean areas. And should the trade war with the United States continue for an extended period, Mr. Mu said China may explore working with Russia, Ukraine and Kazakhstan to expand the production of oilseeds and protein meals in those countries.