The US-China trade war has been escalated this week by new tariffs slapped on each other, with Trump administration announcing hefty tariffs on $200bn in Chinese goods on September 17, and Beijing quickly responding by levying new tariffs on $60bn in US goods.

While there is no doubting that such a war is really doing bad to global supply chains, it is still double-edged in some sense, say, reshaping business landscape. Take for example, soybean market.

canada soybean farmer - Canada’s Soybean Farmers Have a Chance in China-US Trade War

Photo/China Daily

China is the world’s largest consumer of soybeans, a big buyer of America’s soybeans. Over the past six years, China bought slightly varied huge volume of soybeans from the US. Soybeans are the main agricultural products the US exports to China, claiming about 60 percent of agricultural produce totaled $20bn in value that are sent to China.

China soybean supply - Canada’s Soybean Farmers Have a Chance in China-US Trade War

The picture changed when Trump announced tariffs on Chinese goods. China has quit buying soybeans from the US, and is looking to alternative sources, aside from Brazil, Argentina, Canada appears as a good candidate.

According to coverage of Canadian media, more Chinese ships make appearance at Canadian ports to buy soybeans. Canada sold about 4.96 million tonnes of soybeans on international market in 2017, with nearly 40 percent (about 2 million tonnes) reaching China. The figure was about 800,00 tonnes in 2012.

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The country’s biggest producer in Ontario, who grows about 3.8 million tonnes of soy crops in 2017, contributing about a half to the country’s total 7.7 million, of which, nearly 5 million is grown for export, to China in particular.

Soybeans export from the country to China is technically expected to rise with the escalating trade dispute. However, according to Markus Haerle, chair of the Grain Farmers of Ontario(GFO), on the one hand, there are infrastructure limits on shipping cargoes out of Pacific Coast terminals. On the other hand, look at the volume of soybeans the US and Canada sent to China in 2017, 2,000,000 tonnes versus 32,845,049 tonnes, the gap left by the US cannot be easily filled by Canadian farmers.

As the trade war has resulted in drop in US soybean prices, Chicago futures market sees a price drop from $10.40/bushel in May before Trump waged the war against China to the recent $8.50/bushel, the President is reportedly giving out $12 billion to assist farmers in making it through.

As long as US farmers are subsidized, their crop may outperform Canadian soybeans on world markets in terms of price. Markus Haerle said, he hopes Ottawa would do something to aid its vulnerable farmers, or else the GFO would like to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to give farmers a chance to explore new market for export.

 

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