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US farmers 'nervous,' as China threat of 25 percent tariffs on soybeans could cause pain

Jeff Daniels
Beijing's threat to impose a 25 percent tariff on American soybeans is causing uneasiness in the farm belt ahead of the White House's expected decision Friday to announce new duties on hundreds of Chinese products.

Beijing's threat to impose a 25 percent tariff on American soybeans is causing uneasiness in the farm belt ahead of the White House's expected decision Friday to announce new duties on hundreds of Chinese products.

"I am nervous to think about the scenarios of what's going to happen if it does go into effect," said Heath Houck, a soybean farmer in Nokomis, Illinois. "In the last three to five years, with the depressed farming economy the way it is, it can certainly hamper us even further. It kind of scares me, to be honest."

The U.S. exports about $14 billion worth of soybeans to China , according to the U.S. Department of Agriculture. China buys roughly half of the U.S. soybean exports, and roughly one in three rows of soybeans grown on the nation's farms goes to the world's second-largest economy, according to industry estimates.

President Donald Trump met with trade advisors on Thursday, and the administration is expected to roll out a truncated list of Chinese products subject to duties , three sources told CNBC. Beijing previously vowed to retaliate against Trump imposing new tariffs on Chinese products.

The American Soybean Association, which represents more than 300,000 soybean farmers, on Thursday was one of the agricultural associations that issued an "appeal to Congress" to help stop trade tariffs. Wheat and corn grower trade associations along with the Association of Equipment Manufacturers joined in.

"After weeks of engaging with the Trump administration to gain insight into the future of trade tariffs, agriculture producers and related industries dependent on exports to China are turning to Congress for help," the agricultural groups said in a joint release.

The announcement said retaliatory tariffs by Beijing "would not only directly affect America's producers, but also tangential industries that support agriculture," including farm machinery producers. Many growers of soybeans also plant corn, wheat and other crops.

In April, Beijing threatened to slap the 25 percent tariff on the imports of U.S. soybeans. If that were to happen, it would raise the cost of American beans for Chinese buyers and make South American beans much more attractive.

"The buyers of our soybeans are assuming the worst," said soybean farmer Kevin Scott in Valley Springs, South Dakota. "The markets are very soft right now. We've lost a dollar per bushel in the last couple of weeks, and it's been pretty frustrating as a farmer."

Scott said he's already locked in his mix of corn versus soybeans so there's no turning back at this late stage. "Now we're quite a bit below our break-even price as far as cost of production," he said.

Chicago Board of Trade soybean futures have fallen about 9 percent in the past two weeks, and July soybeans — the most active contract — settled at $9.2725 per bushel Thursday. The contract traded in the session at its lowest point since August 2017.

"The market is worried that if we're having problems with China, the world's largest importer of soybeans and our biggest export customer, that it will cut into our export business and we're going to have more soybeans," said Ted Seifried, chief ag market strategist with Zaner Group, a Chicago-based futures brokerage.

Seifried said the large commodity funds were long on soybeans as of two weeks ago but "have run for the door in a hurry and are now starting to get a little bit short, it seems." He said the outflow from the "speculative money" has contributed to soybeans being weak.

Perdue University economists estimate Chinese soybean imports from the U.S. could plummet by as much as 65 percent if China imposes the tariffs. A study issued in March also indicated that besides U.S. economic well-being suffering from tariffs, the Chinese also would suffer.