By Susan Crowell / editor@farmanddairy.com
There’s a well-known quote attributed to President Harry Truman. “Give me a one-handed economist. All my economists say, ‘on one hand…, then ‘but on the other hand…’”
The idea is that many economists are often loath to take a firm position because an economic impact depends on a lot of variables.
On one hand, one economist I read this week says there is a glimmer of hope that the tariffs proposed by China against U.S. pork may not be all bad news.
Bad news, yes, but Michael Swanson, chief ag economist for Wells Fargo, tempers the news in that recent commentary.
Swanson looked at the numbers to assess the potential damage, and found — at least when it comes to the pork market — the U.S. exports about 22% of its domestic pork production. Of that, about 17% goes to China and Hong Kong, a sizable share, yes, but Swanton writes, “it isn’t anywhere near critical.”
Although pork producers would beg to differ, Swanson continues to explain that China will simply look elsewhere for pork, and other buyers will look to the U.S. for deals. Overall, he says, “the pork market will sort itself out quickly.”
It’s a little different, but some of that is already happening in the soybean market, as buyers purchased a sizable order of U.S. soybeans, headed to an as-yet undisclosed location. A Reuters reporter who talked to trading insiders says the speculation is the beans are headed to processors in the Netherlands and Germany.
If China implements the tariffs and isn’t buying U.S. beans, they’ll need to buy them somewhere (oh, hey, Brazil). A lower price on U.S. beans will make them more attractive to buyers other than China. Key adjective, though, is “lower.” (Although soybean futures are up at this writing, as the president’s trade rhetoric shifted in a speech Monday.)
On the other hand, though, there is a long-term shake-out to consider if the tariffs are implemented.
Ohio State University ag economist Ian Sheldon reminds us that China accounts for the bulk of global soybean imports — two-thirds of the total. U.S. exports make up about a third of that, “making soybeans the United States’ second-most valuable export to China after varieties of airplanes,” he writes.
Losing that market hurts. A lot.
And the U.S. stands to lose that market share to Brazil, the No. 2 exporter of soybeans, and “U.S. farmers may not be able to grab that market share back,” Sheldon warns.
Of course, all of this may or may not ever happen.
Ultimately, there’s the added frustration of farmers being used as a pawn in the global chess game between the U.S. and China. Naturally, China would target agricultural goods for tariffs because most farm states supported President Donald Trump, and the foreign government knows those farmers will be pretty vocal to get the president to back off his tit-for-tat trade negotiations involving agriculture.
Tune in tomorrow for another episode of As the World Turns.
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(Commentary by Farm and Dairy Editor Susan Crowell)
