The trade tariff war between the United States and China reached new heights recently when China ordered an end to all agricultural imports from the U.S.
The impact of the trade war is likely going to have long-term impact on Michigan’s soybean industry, according to those in the agriculture industry, as the state loses a major soybean market.
The tariff battle began in June 2018, when the Trump administration began imposing tariffs on China, Canada and Mexico. China retaliated with its own trade taxes on products it exports to the United States.
While there have been several attempts to negotiate a way around tariffs, things came to a head when President Donald Trump ramped up tariffs on $300 billion in Chinese imports. Beijing responded by asking its state-owned enterprises to suspend purchases of U.S. agricultural products. Additionally, privately run Chinese enterprises that had received waivers on American soybeans have stopped buying the commodity due to uncertainty over trade relations, according to Bloomberg.
Soybeans are Michigan’s largest food export at more than $700 million annually, according to Crain’s Detroit Business.
As much as 60% of the state’s soybean production is exported, according to the Michigan Soybean Promotion Association.
So how is that going to impact Michigan’s soybean market?
“The China market is not going to come back,” said Jim Byrum, president of the Michigan Agri-Business Association. “Michigan soybean farmers will be out of luck when it comes to any future resolution” between the U.S. and China.
Byrum pointed out that China had already shut American ag imports to a trickle and has found new markets from which to obtain agricultural products, giving growers in other countries the opportunity to fill the demand.
“If soybean producers don’t have the ability to export to China, things will not get back to normal,” he explained. “China imports 70% of Michigan’s soybeans, and if producers lose that opportunity it will just be devastating.”
President Donald Trump and the U.S. Department of Agriculture have indicated they are seeking new markets for U.S. products, but Byrum said that’s not likely.
“That’s just a big fallacy. It’s not like we don’t already look for new markets every day,” Byrum said. “There are no huge new market opportunities. The world is a finite place, and losing a big opportunity like this is a fundamental problem.”
Sonja Lapak, communications director for the Michigan Soybean Promotion Committee and Michigan Soybean Association, said the China market has essentially been gone for more than a year because of the trade war, and the import ban will just prolong the industry’s loss.
She noted, however, that national soybean organizations are seeking new opportunities.
“We are working to find new, emerging markets in Africa and Asia,” she said
Jeff Sandborn, a Portland wheat, soybean and corn farmer, said both countries lose out in a trade war.
“I think it is very unfortunate that food gets thrown into trade battles,” said Sandborn, who also serves as District 4 director of the Michigan Farm Bureau and sits on the Corn Board of the National Corn Growers Association. “When we start drawing lines in the sand, we hurt our own people.
“China needs to feed a huge population and they rely on us, and they should continue to focus on importing from countries where it is most efficient,” he explained.
Sandborn said he has spoken with farmers in other states, and those west of the Mississippi River will be most damaged by the trade war because the entire infrastructure of the farm export chain in that region is set up for export to China.
Michigan will feel less of an impact, he said, because of the ability to process soybeans in-state. He explained another soybean processor plant is being built in Ithaca by Zeeland Farm Services and is expected to be operational for the 2019 harvest.
Lapak agreed that the new processor will be a boost to the industry.
“Right now we area able to process about 10% of our own soybeans,” Lapak noted. “The new ZFS facility will allow us to process probably 50% of soybeans in-state.”
The soybean oil produced will be shipped to other locations in the United States for use in other products, while soybean meal processed in-state will be used for livestock feed, she said.
Another Michigan-grown product will be impacted by the Chinese ban, but on a minimal basis.
Michigan exports tens of millions of dollars in tart cherry products every year, according to the Cherry Marketing Institute in DeWitt. But China does not import tart cherries.
Julie Gordon, export marketing director for the institute, said China has a huge sweet cherry market.
“The exports of tart cherries to China will not be as negatively affected as the sweet cherry market,” Gordon said. “It will have an adverse effect, but we are a very small player in the sweet cherry market.
She said about 20% of Michigan’s cherry production involves sweet cherries, but the state produces about 75% of the nation’s tart cherry product.
In July, the US Department of Agriculture announced a $16 billion package aimed at supporting American agricultural producers impacted by the trade war.
The Market Facilitation Program provides payment rates from $15 to $150 an acre for farmers and producers impacted by the “unjustified trade retaliation” on a county-by-county basis. Producers can sign up for relief at local Farm Services Agency offices through Dec. 6. FSA offices are located in East Lansing, Mason, St. Johns, Charlotte and Owosso.
Per-acre non – specialty crop county payment rates, specialty crop payment rates and livestock payment rates are all currently available at farmers.gov/manage/mfp.