President Donald Trump’s trade war will change forever the way top importer China buys its soybeans.
That’s according to Archer-Daniels-Midland, one of the world’s largest agricultural commodities trader.
The tit-for-tat tariff spat, which already has shrunk purchases of American beans, probably will mean China will try to reduce its dependence on the United States by buying from elsewhere and improving yields of its own production, ADM Chief Financial Officer Ray Young said.
“We should not be naive to assume that longer term, China will not want to become more self-reliant on their own supply of agriculture products,” he said at the Kansas Fed Ag Symposium Tuesday.
“I think this has been a wake-up call for China in terms of understanding the relationship between the U.S. and China and how they will view food security in the future.”
China imposed retaliatory tariffs of 25 percent on American soybeans more than a year ago, bringing shipments to a halt before some goodwill purchases in December and earlier this year. Since then, the nation has turned to purchases from South America.
At the same time, the spread of a deadly pig disease reduced China’s soy needs.
Chinese imports of the oilseed probably will come in at 80 million to 85 million metric tons as African swine fever, also known as ASF, cuts demand for pig feed, Young said.
ARTICLE CONTINUES BELOW ADVERTISEMENT
Before the trade war, ASF and China’s economic slowdown, expectations were for purchases of 100 million to 105 million tons, he said.
“Going into the trade war, the thought process was that China couldn’t survive without buying any U.S. soybeans,” he said. “It’s turned out to be wrong. China can survive without buying any U.S. soybeans, partly due to the ASF issue that has unfolded.”
ADM, which has facilities in Cedar Rapids, still is positive that the spat will be resolved at some point, bringing more purchases of U.S. agricultural commodities including soybeans and ethanol.
But long-term, the U.S. needs to wean itself off China and find other uses for soy and corn, according to the firm.
Chinese soy yields are a little more than half those in the United States, and the nation will look to improve that, Young said. China also iscarrying out land reform, which will consolidate farms into bigger structures and allow for more agronomical improvements.
In a bid to be less reliant on the likes of ADM and Cargill — which also operates facilities in Cedar Rapids — China set up Cofco International, a company formed from the acquisition of Dutch grains trader Nidera and the agriculture arm of Noble Group, Young said.