US should improve relations to retain access to Chinese soybean market

A Bloomberg report saying Brazil is pushing the US out of the world’s biggest soybean market – China – is gaining much attention.

Although the report is somewhat exaggerated and alarmist, analysts in the US, which seeks to contain the rise of China, are concerned that US farmers may become victims of Washington’s long-term containment policy toward the world’s second-largest economy.

However, this is an issue that Washington should be concerned about, not Beijing. Where China imports soybeans from and how much it imports depend on China’s market demand, rather than the subjective desires of the US.

China is the world’s largest soybean importer, accounting for nearly 60 percent of global trade and half of US soybean exports by value. However, Bloomberg said on Monday that, for years, Brazil has taken an increasingly bigger share of soybean trade away from the US, and now, South America’s shippers are even starting to dominate during the typical seasonal lull.

“Chinese buyers are snapping up Brazilian soybeans for delivery in October, a time of year when US exports are typically at their peak,” the Bloomberg report said, citing people familiar with the trades.

The Brazilian soybean sector is perceived to be eroding the share of the US in the Chinese market. This is a result of multiple factors, among them Brazilian soybeans’ price advantage. Brazil’s soybean harvest for the marketing year 2022/23, estimated by the US Department of Agriculture at 156 million metric tons, topped the level of the previous year by 20 percent. A bumper harvest will likely consolidate the price advantage of Brazilian soybeans.

The pressure faced by US soy farmers didn’t begin today. In June 2018, then US president Donald Trump announced a 25 percent tariff on $50 billion of Chinese products, and China responded in the following weeks, with a 25 percent tariff on $50 billion of US goods, including agricultural products such as soybeans.

The US government was the initiator of the irrational trade war against China. Washington arrogantly believes it can arbitrarily determine the rules of China-US trade, but trade data will teach American politicians a lesson.

China has the right to exercise self-defense. Some Chinese analysts said that what China needs to do is to diversify soybean imports and strengthen cooperation with developing countries, including Brazil.

At the same time, in order to ensure its food security, China is accelerating the domestic production of soybeans. Northeast China’s Heilongjiang Province, the country’s main soybean production base, contributes more than 40 percent of the total soybean planting area. According to the Xinhua News Agency, the province achieved its target of adding 10 million mu (666,667 hectares) of soybean plantation area in 2022, with its total soybean growing area exceeding 68.5 million mu.

China has the ability to fully ensure its national food security in an increasingly complex geopolitical environment, but American farmers are sensitive to fluctuations in the Chinese market. To some extent, Bloomberg is somewhat right to say that the world’s soybean market is dominated by one major buyer: China. This means that American farmers cannot afford to lose the Chinese market.

US Treasury Secretary Janet Yellen was quoted as saying earlier in July the US should look for ways to further “de-escalate” tensions with China, but it would be premature to eliminate the tariffs imposed on Chinese products by the Trump administration. It seems that the US still regards tariffs as an important and effective tool to contain China.

If the US refuses to remove the additional tariffs on Chinese goods, it will be unrealistic for some US politicians to hope that China will give special preferential treatment to US agricultural products, and believe that American products, whether or not they have price competitiveness, should occupy the Chinese market. China will continue to import US soybeans based on its own demand, but if US soybeans want to defeat their competitors in the Chinese market, they need to prove their competitiveness.

China is an important export destination for American agricultural products.

If the US government truly considers the interests of the US economy and US farmers, it should effectively improve China-US relations, eliminate additional tariffs on Chinese goods, and push economic and trade relations back on track.

Tags: Market, demand, China, exports, Brazil, soybeans, US, imports