Tuesday, February 26, 2019


Donald Trump's team is touting the sale of soybeans to China, as if it vindicates their tariff policies.


Here's the problem. If you're going to celebrate that the Chinese have committed to buy 10 million tonnes of soybeans - as Secretary of Agriculture Sonny Purdue did this week - then you need to add for context that China was once the top purchaser of U.S. soybeans, buying 30-35 million tonnes a year. Then, because of Trump's tariff policies, China canceled all their soybean purchases. 

So, if my math is correct, even with the announced 10 million tonnes purchased by China we're still about 20-25 tonnes off from what China once purchased. Even if we add the early February announcement that China was going to purchase 5 million tonnes of soybeans we still have a deficit of 15-20 million tonnes (China had zero U.S. soybean imports for November, 2018).

(U.S. farms are declaring bankruptcy at an alarming rate, due in part to Trump's policies and rising interest rates. This is a side issue for another day. So are the costly subsidies designed to buy off farmers hurt by Trump's policies.)

So, yeah, Trump's announcement that China is going to purchase soybeans again is kind of like starting a house fire and wanting credit for saving the family's home because you alerted the authorities. Yes, the family is safe, but we still have fire damage; which brings me to the next issue. 

The Trump administration is now bragging about selling rice to China, as if selling rice to the world's #1 importer of rice is a big deal. But the Trump administration's decision to crow about selling rice to China - as if it's akin to selling ice to an Eskimo - is more smoke & mirrors. 

Related image

Rice imports into China, from their 14 rice-suppliers, cost China $1.8 billion in 2017. That's a 73.8% increase from 2013, and a 15.2% increase from 2016 to 2017. Below is a list of the top providers of rice to China.

  1. Vietnam: US$1.02 billion (55.9% of China’s total rice imports)
  2. Thailand: $544.1 million (29.8%)
  3. Cambodia: $101.1 million (5.5%)
  4. Pakistan: $93.6 million (5.1%)
  5. Laos: $32.8 million (1.8%)
  6. Myanmar (Burma): $31.8 million (1.7%)
  7. Japan: $1.1 million (0.06%)
  8. Russia: $962,000 (0.05%)
  9. Taiwan: $314,000 (0.02%)
  10. South Korea: $208,000 (0.01%)
  11. India: $10,000 (0.001%)
  12. United States: $9,000 (0.0005%)
  13. Canada: $2,000 (0.0001%)
  14. Italy: $2,000 (0.0001%)

The key here is that China has 1.4 billion mouths to feed and has been importing rice from other countries for some time. It's needs - rather than Trump's strong-armed tariff tactics - are what's driving China's purchase of U.S. rice. 

- Mark

P.S. Then we have this: "27.5 million tons of US soybeans expected to go unsold this year as a direct consequence of the trade war with China," Business Insider.

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