Business

China puts U.S. soy buying on hold as midwest rains hamper planting

Reuters

Workers transport imported soybean products at a port in Nantong, Jiangsu province, China April 9, 2018. Picture taken April 9, 2018.
Reuters Workers transport imported soybean products at a port in Nantong, Jiangsu province, China April 9, 2018. Picture taken April 9, 2018.
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The United States’ ongoing trade war with China, paired with pounding weather conditions, continue to create a challenging season for farmers in Iowa and the Midwest.

China, the world’s largest soybean buyer, has put purchases of American supplies on hold after the trade war between Washington, D.C., and Beijing escalated, according to people familiar with the matter late last week.

State-grain buyers haven’t received any further orders to continue with the so-called goodwill buying and don’t expect that to happen given the lack of agreement in trade negotiations, said the people, who asked not to be named because the information is private.

Still, China currently has no plans to cancel previous purchases of American soybeans, the people said.

President Donald Trump escalated his trade war with China this past month, ramping up tariffs on about $200 billion of Chinese goods, prompting Beijing to retaliate with further duties of its own.

Trump and his counterpart Xi Jinping are expected to meet again at the end of June for the Group of 20 summit, when some analysts predict a potential resolution.

Soybean futures in Chicago slumped to a 10-year low earlier this month as the tensions peaked. Since then, prices have rebounded as a deluge of rain roils U.S. plantings.

Stormy weather

For the past five years, the 18 states that produce the majority of America’s corn crop had an average of 90 percent of their fields planted by the end of May, according to data released this past Tuesday by the U.S. Department of Agriculture.

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At the same time this year, 58 percent of the corn crop is in the ground. The outlook for soybeans is just as dismal, with 29 percent in the ground compared to 66 percent in years past.

“Week after week, farmers haven’t been able to get out in the fields to plant corn and soybeans,” said John Newton, chief economist at the American Farm Bureau Federation, noting that this was the worst planting day on record since the USDA began tracking such data in the 1980s.

“The frequency of these disasters, I can’t say we’ve experienced anything like this since I’ve been working in agriculture.”

From the Rocky Mountains to the Ohio River Valley, millions of Midwesterners have endured unremitting rainfall, hundreds of dangerous tornadoes and debilitating flooding brought on by swollen waterways that are spilling into already saturated grounds — much of it farmland.

Of the 6,000 flood gauges that the National Oceanic and Atmospheric Administration maintains on waterways across the country, 381 were above flood stage this week across the Central Plains and in the upper Midwest, said Storm Prediction Center chief forecaster Bill Bunting.

Much of the most-severe flooding is concentrated in northwest Iowa, southeastern South Dakota, Kansas, Missouri, Illinois and Oklahoma. On Tuesday Kansas’s governor declared all 77 counties under a state of emergency.

And so far in 2019, NOAA has processed nearly 200 more tornado reports than average at this point in the year.

No delivery

Government data indicates China bought about 13 million metric tons of American soybeans after the countries agreed to a truce in December, in a move that showed goodwill toward getting the trade dispute resolved.

While U.S. Agriculture Secretary Sonny Perdue said in February that China had pledged to buy an additional 10 million tons of American soy, purchases now have stopped.

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USDA data also showed that China is yet to take delivery of about seven million tons of U.S. soybeans that it has committed to buy in the current marketing year.

Spokesmen for state-run buyers Cofco and Sinograin had no immediate comment.

Clamping down on U.S. soybean purchases is a direct strike at Trump’s political base. In the 2016 election, Trump carried eight of the 10 states with the largest soybean production, all of them in the Midwest.

Iowa, the country’s second-largest soybean producer after Illinois, swung from Democrat to Republican in 2016.

The trade war with China is compounding the strain of five years of falling commodity prices and losses from spring flooding across the Midwest.

Overall, U.S. farm income dropped 16 percent last year, to $63 billion — about half the level it was as recently as 2013.

The president moved to shore up support in rural America immediately as he escalated the trade dispute in May, announcing on the same day a new round of trade aid for farmers.

The U.S. Agriculture Department said the aid package would total $16 billion.

There are signs China is replacing U.S. soybeans with Brazilian supplies. The premium paid for soybeans loading at Paranagua port more than doubled over the past month as the pace of exports has accelerated in the past weeks.

“Brazil will supply China almost exclusively from now on,” said Pedro Dejneka, a partner at Chicago-based MD Commodities.

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China also is grappling to contain a deadly swine disease outbreak in its hog herd, curbing demand for livestock feed. Soybeans are a key component of the rations, and Rabobank estimates about 30 percent of the nation’s pork supply has been lost.

• Bloomberg News and the Washington Post contributed to this article.

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