Soy Growers Are Hurting, But Barge Picture Is Complex
Last week, we ran a piece about how barge movements are not showing any dramatic impacts so far from the tariff wars with China, including a large drop in soy exports to China.
According to Informa Economics’ Ken Eriksen, soy exports to China in 2018 dropped from a projected 2.3 billion bushels to 1.8 billion. Farmers are soon to make decisions about what to plant for next year. Informa estimates that up to 6.7 million acres of U.S. farmland may be taken out of soybeans next year if the trade disputes continue, switching to corn and wheat.
According to Eriksen, the obstacle to Chinese soy purchases from the U.S. is not merely price; even with the new tariffs, American beans can still compete with Brazilian beans on price this year. But Chinese trade authorities, obeying political higher-ups, will not issue import permits for American beans.
There is no question that the trade war fallout is extremely disruptive for soy growers. A letter from Jim Sutter, CEO of the U.S. Soybean Export Council, to members was stark: “To say that 2018 has been a challenging year for U.S. soybean growers and for the entire U.S. soy industry would be an understatement.”
Sutter drew attention to a story from The Waterways Journal’s brand-new sister publication, High Plains Journal, about how his association, along with the American Soybean Association and United Soybean Board, are “hitting the reset button” with regard to export strategies—including strengthening their collaborations. Sutter mentioned ongoing efforts to develop new export markets and grow existing ones to make up for the China shortfall.
Eriksen said a few bright spots make that task easier. River movements of corn are strong, and the ongoing oil and gas boom has kept frac sand moving on the rivers as well. Mexico has increased its soy buys from the U.S. Brazil is still suffering from the effects of a nationwide truckers’ strike. It and Argentina are importing large amounts of American corn, much of which moves on barges. In fact, said Eriksen, overall Center Gulf Coast volumes for export corn and beans will likely remain roughly constant, even as their destinations change. (That’s in marked contrast to the Pacific Northwest, which depends on Asia as its export market for grains.)
Export coal also continues to bolster some barge movements. In 2017, total U.S. coal exports doubled; exports to Asia increased by 61 percent, according to the U.S. Energy Information Administration. An October 7 article in Forbes pointed out, “Now Asia—which accounts for close to 80 percent of total global coal usage—is increasingly turning to the U.S. to supply coal. We are still the world’s third largest coal producer.”
Oil and gas pipelines are once again strained to their limits, as new pipeline infrastructure, partly hobbled by protests and permit delays, fails to keep up with booming U.S. oil and gas production. Much of that production of light sweet crude is destined for export as U.S. refineries, built to process heavier imported crude, continue to retool.
No one knows at this point whether and how the trade dispute with China will be resolved. Some observers claim that Trump’s re-shuffling of the international trade order serves a longer-term strategy of containing China. They point out that the new trade agreements the Trump administration signed with Mexico and Canada to replace NAFTA have clauses restricting those countries’ trade with China.
Whether the achievement of that goal, or Trump’s proffered help, will do much to help soy farmers remains to be seen. Given how much soybeans American farmers are storing, and the fact that Brazilian soy farmers are increasing their acreage by an estimated 3 percent, whoever is buying soybeans next year should enjoy bargain prices.
