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Beginners Guide: Soybean Tariffs


Due to the political climate soybeans have become one of the most popular search words on the Internet and today we are going to help you understand why. It's hard to open a conservative or liberal newspaper today and not see some news about tariffs. Unfortunately, farmers are stuck in the middle of a tug-of-war between the Trump administration putting tariffs on foreign goods and other nations retaliating with tariffs of their own.

What are soybeans?

Soybeans are native to East Asia but are now grown and consumed in the United States. In fact, soybeans are the Nation's number one cash crop by acreage. Many restaurants offer edamame on their appetizer menus. You eat soybeans in soy sauce, tofu, soy milk, tempeh, soy ice cream and soy flour. They grow on short leafy shrubs in a pod and look a lot like pea pods.

What are they really used for?

In the United States soybeans are used primarily for animal feed. Only 15% of soybeans grown in the United States are for human consumption with around 70% going to animal feed.

Who grows them?

Farmers in the Midwest are the largest growers of soybeans in the United States. This year was the first year soybeans surpassed corn acreage in planting in the United States in almost 40 years. In 2017 soybean production sales were around $41 billion in the United States putting them just behind corn in dollars.

So what is all the noise about?

You are hearing so much about soybeans today because as much as 60% of the soybeans grown in the United States are exported overseas. That’s billions of dollars coming into the United States each year due to soybean production. Last year China alone took $14 billion of soybeans. As we slap tariffs on other countries products, they return the favor and place tariffs on our products. China recently placed a 25% tariff on U.S. soybeans.

The tariffs caused a huge rush to purchase soybeans before the tariff took effect and the result will be an exaggerated decrease in demand going forward because users will have a good supply and don't want to pay the tariff. They will look to other countries for their soybeans, countries not hitting them with tariffs. We already see this happening with the price of soybeans which are hitting a recent multi-year low right now. Soybean prices are down about 20% over the past two years.


Month soybean prices from 2009 – July 2018

Soybean farmers expect a $12 billion aid package that should be available later this year. It includes direct payments to growers of soybeans based on the size of their production last year. It also consists of the government purchasing surplus crops. This is a tough pill to swallow for a group that prides themselves on independence and then has to depend on the government subsidies to survive.

Are other agricultural products impacted by tariffs?

Yes. Corn, cotton, beef and pork all have a 25% tariff by China. Wine will have a 29% to 45% tariff depending on variety. In-shell almonds and walnuts will have a 40% tariff. The farmers are not the only ones who experience a loss. All the supply companies to the growers will feel the pain as well. Yes, that even includes manufacturers of machinery, seed, fertilizer, and irrigation equipment.

The reality is we all feel we could wake up tomorrow and the trade war could be over and the tariffs gone. However, making that your business strategy could be costly down the road. We’d love to hear in the comment section how the trade war is affecting you and what your plans are to do about it. 

 

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Richard Restuccia

Richard is a water management evangelist. He believes passionately in water efficiency and sees the financial and social benefits far too often to keep a secret. Richard is a spokesperson at industry events and on the Hill to provide direction and insight on landscape water management best practices. Richard puts his words into action through service on various boards and committees. He served on the Irrigation Association’s Board of Directors. Richard also writes for other publications and is an award winning contributor to Lawn & Landscape Magazine. In 2014 his efforts were recognized with a “Leadership in Landscape” award. He has a great interest in the supply of clean water for people in developing countries and as an outdoorsman, spends his free time running, swimming and surfing.

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