It’s becoming a dangerous tit-for-tat: US President Donald J. Trump has threatened tariffs on as much as US$150 billion in Chinese goods in retaliation for what his administration considers violations of intellectual property. In retaliation, China warns that it will impose tariffs on products of equal value, including agriculture items such as soybeans, grains and sorghum.
At the time of this writing, China is sending an envoy to the US to try to cool the escalating trade dispute. Meanwhile, farmers in the US are worried. For one, soybeans alone leads to the employment of more than 300,000 people, and high Chinese tariffs would hit states like Indiana, Illinois, Iowa, Minnesota, and Nebraska, where most soybeans are grown.
Brent Bible, a farmer in Lafayette, Indiana, who grows soybeans and corn and is a member of Farmers for Free Trade, states on the organization’s website that he has major concerns about Trump’s current actions on trade and tariffs. “The fact that China is our No. 1 soybean customer makes us very vulnerable,” he says. “Our farm and others like us will be the first casualties of the trade war.”
That’s because many soybean farmers are operating on thin lines of profit and credit and are already financially unstable. Many are planting fewer soybeans given price volatility. In fact, US Agriculture Department (USDA) figures report that between April 27, 2018, and May 3, 2018, net sales of 354,300 metric tons (MT) for 2017/2018 were down 15% from the previous week and 57% from the prior four-week average. USDA reports that China canceled a net 62,690 MT of US soybean purchase for the marketing year ending August 31.
Soybeans are America’s leading agricultural export. Between 2001 and 2016, US soybean exports to China escalated from US$1 billion to US$14 billion, USDA says. Research firm Panjiva states that the US soybean industry represented US$21.6 billion in sales last year, with nearly 60% going to China.
A host of seaports across the United States handle soybeans and other grain items. Among them is the Port of South Louisiana, which in the first quarter of 2018 handled 4,847,719 short tons of soybeans versus 6,0206,342 short tons in same period of 2017. The port handles about 60% of raw grain exports leaving the midwest, including soybeans.
At the Port of Vancouver USA in Washington state, grains such as wheat, corn and soybeans accounted for 5.3 million MT in 2017, a 0.52% decrease over 2016. At 220,000 metric tons, United Grain Corp. operates the largest grain elevator on the West Coast at the port. Officials at United Grain already report seeing the effects of the tariffs dispute, given that the facility exports soybeans almost exclusively to China.
Meanwhile at the Port of Los Angeles, director of media relations Phillip Sanfield said: “We haven’t seen any impact yet with respect to tariffs. We’ll be watching and see in the months to come.”
Port officials there are watching events closely and are hopeful that differences between the two countries can be worked out. “Beyond that, we stay out of the commentary and politics,” Sanfield said.
But he offered a few facts: the combined market of China and Hong Kong is by far the Port of Los Angeles’ largest trading partner. In 2017, US$284 billion worth of goods passed through the Port of Los Angeles. Of that amount, US$145 billion in trade was with China and Hong Kong.
Soybeans and soybean products accounted for 1,134,055 MT in 2017, with China being the third-largest export trading partner for ag-related products at the Port of Los Angeles. China accounted for 255,333 MT, compared to Taiwan’s 616,325 MT and Indonesia’s 357,832 MT.
Other agricultural items such as US-produced wine, fresh and dried fruit and nuts, apples, pears, oranges, cherries, strawberries, peaches, lemons, mandarins, plums, almonds, cashews, pistachios and walnuts are also expected to be impacted by China-imposed tariffs. USDA reports that the targeted US fruit and nut exports are worth US$977 million, and US pork and processed items are worth US$2 billion.
John Wolfe, CEO of the Northwest Seaport Alliance, sees Washington’s Ports of Seattle and Tacoma and Seattle-Tacoma International Airport (Sea-Tac) being impacted because of the commodities they handle.
“Cherries are a good example of this potential impact,” Wolfe says. “About 30% of [the Northwest cherry harvest] is exported, a majority shipped by air through Sea-Tac. China is the top export market for Washington cherries, buying 2.9 million cases valued at US$127 million each year. If the Chinese market is closed to these exporters, they are going to have a very difficult time finding alternative markets for their seasonal, perishable crop.”
While Port of Oakland officials won’t comment on the tariffs, the communications department office issued a press release that hints of the potential fallout based on how well ag shipments have done in the past. It reports that containerized shipments of fresh fruit and vegetables through the Port of Oakland have jumped 36% since 2013 and last year accounted for 135,000 TEUs worth US$6.1 billion. The volume was less than 80,000 containers just four years ago. Officials stated that oranges and grapes were among top exports. Japan, South Korea and Hong Kong were leading export markets.
The Pacific Merchant Shipping Association said that Oakland shipped 42.3% of US 2017 fruit and nut exports to China and handled 93% of wine exports.
The Port of Oakland also exported 60,000 TEUs of fresh and frozen meat products – primarily beef, pork and poultry – during 2017, of which two-thirds went to Japan. That was up 24% from 2013 totals.
Port officials are counting on meat shipments to grow later this year after its 283,000 square-foot refrigerated distribution centre known as Cool Port Oakland opens. That facility is estimated to handle some 50,000 containers of beef, pork and poultry annually. But it’s obvious that the tit-for-tat between the US and China is creating a wait-and-see situation before actually determining how much product the distribution centre will initially handle.
By Karen E. Thuermer
Correspondent | Washington