Soybean farmers face growing concern with Chinese market
With soybeans planted and starting to take root, Delaware’s largest cash crop remains a bright spot among international trade, but a newfound trade deal and complications from COVID-19 may cast a shadow.
Delaware Farm Bureau President Richard Wilkins noted that farmers in the First State are blessed to be diversified in crops, like corn, string beans and watermelons. But with commodity prices on the rise, he’s worried that with more farmers planting beans, it could saturate the market.
“With the price [to plant them] now lower, farmers think it’s time to produce more even though you make the best profit when there’s a little scarcity,” he said. “That’s what hurts us every time … But farmers also have to be content with mortgage payments and debt repayment.”
Delaware farmers are one small piece in the larger picture of the East Coast’s role in international trade. The United States ranks as one of the top producers of agricultural goods in the world, with soybeans, produce and other foods at the forefront.
Delaware and the roughly 180,000 acres of the crop contributed $60 million to the state economy, and the nation’s $40.94 billion overall soybean industry. Through merchandisers, the beans can be crushed to form oil or meal for animal feed and later sent off to ports in Baltimore and Norfolk, Va., and later to other countries.
The United States’ largest soybean trade partner in 2018 was China at $17.2 billion. The country buys about 60% of all soybeans produced in the world, but trade dealings have been tense for the past few years as the Trump administration instituted tariffs and sought to renegotiate trade agreements.
It left many concerned, like Jim Sutter, the CEO of the U.S. Soybean Export Council, who said the crop price dropped to the lowest level in about a decade, hurting farmers the most.
Amid the trade war, China turned to Brazil, another top soybean producer. Since the United States’ crop was embattled by weather, Brazil netted $33.2 billion in 2018. But Sutter pointed out that the United States pivoted to other markets, filling the void left by China.
“It really highlighted why diversification was important, even though we’ve been focused on it for some time. There’s a lot of established trade patterns for a reason, and a lot of that had to be shifted around so it was quite messy,” he said.
Exports across the rest of the world increased roughly 41% from the previous year, with a specific focus on Egypt, Pakistan and Bangladesh, Sutter said.
“We saw many good gains in those countries, since the United States is a huge producer that freed up the crop to be sold there,” he added.
Things were looking up for 2020 after President Donald Trump signed a $50 billion Phase 1 trade deal with China in January. In it, China agreed to buy $36.5 billion worth of agricultural products in 2020 and lowering some tariffs on goods.
“But then COVID raised its ugly face,” Wilkins said. “While China is contracted to buy the 2020 crop, it’s nowhere near the same volume of soybeans where it was before.”
Through April, China bought about $6.3 billion worth of agricultural products, well behind the pace it needs to set to meet this year’s goal, according to an analysis by the Peterson Institute for International Economics.
Soybeans were selling at $8.35 per bushel in April, showing an 11% drop from the start of the year. As of June 24, the price has slowly ticked up to $8.75 per bushel.
Complicating matters further, Chinese importers asked exporters in the United States, Brazil and Canada to certify that soybeans are not contaminated with COVID-19, according to Reuters. The move comes after a recent spike in cases in Beijing and mounting concerns that imported foods may trigger more outbreaks.
But Sutter remains optimistic that the United States soy industry will remain strong, now with footholds in growing markets and a new deal to put trade relations back on track with China.
Remembering a speech now-President Xi Jinping made in Iowa in 2012, Sutter said it’s “more true than ever” that agriculture was the ballast that calmed the storm between the two countries.
“There is always going to be some friction, but I believe if we can get Phase 1 operating, everything else will fall into place,” he said. “We’ve seen great growth in other places and I’m certain that will continue.”
Wilkins, on the other hand, noted Delaware soy farmers could see a light at the end of the tunnel with the improvements at the Port of Wilmington.
With some buyers looking for high-protein soybeans, there’s opportunities for food-grade containers to take on the crop from not only Delaware farmers, but those from Maryland, New Jersey and southern Pennsylvania.
He’s also heartened by the ingenuity of the American farmer, as many are looking at direct sales to other farms. That could continue in terms of using soy to feed backyard animals, once again opening a new market.
“We could grow more than we consume this year, which could be a positive. Every year, we run out of hay, so we have to import it from Pennsylvania and Nebraska. This could be the same,” Wilkins said. “The individual farmer is an entrepreneur.”
By Katie Tabeling
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