As Coronavirus Spreads, U.S. Soybean Farmers Can’t Catch A Break

U.S. soybean farmers face multiple obstacles that are out of their control. They have to survive the weather (which was horrible last year with huge rainfalls at the wrong time of the year) to accepting commodity prices. Over the past two years they have also had to face President Trump’s trade war, which caused soybean prices to plummet and in the past few months the African Swine Flu in China has lessened demand for soybeans as Chinese farmers killed millions of pigs.

The latest challenge is the Wuhan coronavirus, which along with the Lunar New Year, seems to have created a situation in China where business has ground to a halt and people are concerned about the safety of food they are buying. Even Trump signing the Phase One trade deal didn’t lead to higher soybean prices. In fact, prices started to drop almost immediately, which may be due to the goals in the deal being insurmountable.

Soybean prices have cratered since Phase One was signed

Soybean prices have fallen 8 of the past 9 days. Soybeans were selling for about $9.40 per bushel right before Phase One was signed and fell to $9.25 by the end of the week. Over the next seven trading days they have fallen to $8.95 per bushel, and it looks like this is in direct relation to the coronavirus outbreak in China since activity has ground to a halt across a large portion of the country.

The decrease in activity is partly due to the Lunar New Year. However, since people are concerned about the food supply and pork is a large portion of the Chinese diet, the unknown outlook for the virus will probably lead to lower demand. With soybeans being a key food source for pigs this would further dampen U.S. exports even with the Phase One trade deal.

Depending on how long the virus impacts the population and how widespread travel bans are imposed, it would not surprise me to see the Chinese government say to the Trump administration that they won’t be able to make the Phase One 2020’s goals. And not just the agricultural ones but all of them.

When you add in the African Swine Flu outbreak in China leading to millions of pigs being slaughtered to try and contain it, the Wuhan coronavirus adds another horrible break on U.S. farmers.

Soybeans used to account for over half of U.S. ag exports to China

In calendar 2017 the U.S. exported $24 billion in agricultural products to China. Of that total $12.2 billion was soybeans or just over 50%. Soybean exports to China fell 75% to $3.1 billion in 2018 after President Trump started the trade war in April that year.

China is almost certain to fall short of Phase One goals

Chad Bown, senior fellow at the Peterson Institute for International Economics, has done an analysis of the overall Phase One trade deal and the four sub-targets. His analysis of the agricultural sub-target shows that it will be extremely difficult for China to import enough to hit the increases outlined in the agreement. This is extremely critical since soybeans have been the majority of U.S. agricultural exports to China.