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Rabo: Soybeans Take Hit in Trade War
By Chris Clayton
Tuesday, January 7, 2025 6:52AM CST

OMAHA (DTN) -- If, or when, President-elect Donald Trump imposes new tariffs on China, analysts at RaboResearch expect China will retaliate immediately and target commodities, especially soybeans.

The impact of Chinese tariffs on American soybeans may be less severe than 2018-19 on United States producers, mainly because China has made itself less reliant on U.S. beans. Rabo noted China already has larger state reserves and has increased imports from Brazil. China also is adjusting some of its feed formulas to rely less on soymeal.

Still, Rabo cites a new trade war with China would drop soybean prices $1.50 to $2 a bushel and reduce soybean planting by as many as 5 million acres.

Rabo's analysts expect Trump will follow through on his promises to place new tariffs on imports. If Trump imposes new tariffs on China, Rabo's analysts expect China to counter with a potential 25% tariff on U.S. grains and oilseeds.

When tariffs hit in 2018, it curtailed soybean tariffs for two years as agricultural trade nearly came to a halt. Rabo noted farmers cut soybean production by 20% in the 2019 planting season. In mid-May 2019, soybean prices fell to nearly $8 a bushel, the lowest since 2008. Exports to China didn't rebound until the 2020-21 marketing year.

The Trump administration responded by paying farmers $23 billion for lost exports over 2018 and 2019.

Trump signed a deal with China in early 2020 in which China promised to import $40 billion a year in U.S. agricultural products. China reached a high of $38 billion in 2021 before starting to phase down its U.S. purchases.

U.S. soybeans, which once accounted for 39% of China's imports, are now just 20% of China's imports.

Rabo's analysis noted if a trade war reignites, Brazil's share of the Chinese soybean market, now at 74%, could increase to 80% or even higher.

A study by the American Soybean Association (ASA) and National Corn Growers Association (NCGA) released in October cited that another trade war with China could cost corn and soybean farmers roughly $5 billion to $8 billion a year in lost value. Filling the void would be South American farmers who would see higher prices and convert more acreage to crops. That study pointed to the prospect of nearly $1 a bushel loss for soybean farmers.

The Rabo report did not look at meat exports. Through October, the U.S. had exported $1.64 billion in beef to China and Hong Kong along with $933 million in pork. China is the No. 3 market for both U.S. beef and pork.

TRUMP SOCIAL POSTS

Trump keeps reaffirming his plans to use tariffs. The president-elect on Monday took to social media to refute a Washington Post article that suggested he would apply tariffs universally, but only targeting certain sectors. The article stated Trump was looking to "pare back" his tariff plans. Trump lashed out at the article.

"The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back. That is wrong," Trump stated on Truth Social. "The Washington Post knows it's wrong. It's just another example of Fake News."

Posting on Sunday about the possibility of one large budget reconciliation bill in Congress to deal with energy, immigration and tax cuts, Trump advocated for no taxes on tip income, stating, "It will be made up with tariffs, and much more, from other countries that have taken advantage of the U.S. for years."

On New Year's Day, Trump also responded to a tweet about the decline of tariffs as a percentage of total revenue over time. A chart showed tariffs have been a small share of federal revenue since the 1930s and '40s. Trump posted in response, "The Tariffs, and Tariffs alone, created this vast wealth for our Country. Then we switched over to Income Tax. We were never so wealthy as during this period. Tariffs will pay off our debt and, MAKE AMERICA WEALTHY AGAIN!"

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN


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