In addition to a drastic decline in annual production value, the study found that a new trade war could cause crop prices to fall in the United States.
United States corn and soybean farmers could lose billions of dollars in annual production value in the event of a potential new tariff-induced US-China trade war, according to a new economic study commissioned by the American Soybean Association and the National Corn Growers Association and conducted by the World Agricultural Economic and Environmental Services.
The study found that “U.S. soybean farmers (could) lose an average of $3.6 to $5.9 billion in annual production value” while “U.S. corn farmers (could) lose an average of $0.9 to $1.4 billion in annual production value” depending on how China would respond to increased U.S. tariffs.
“This burden is not limited to the U.S. soybean and corn farmers who lose market share and production value. There is a ripple impact across the U.S., particularly in rural economies where farmers live, purchase inputs, utilize farm and personal services, and purchase household goods,” the study said. The total economic contribution of soybean and corn production could drop between $4.9 billion and $7.9 billion annually, with the most heavily affected sectors including manufacturing and mining of crop protection, fertilizer products, and energy products, as well as real estate and transportation.
In addition to a drastic decline in annual production value, the study found that a new trade war could cause crop prices to fall in the United States. Soybeans, the study said, could drop between $0.60 per bushel and nearly $1 per bushel below the baseline forecast to 2036. Corn prices could drop between $0.08 per bushel to $0.13 per bushel, on average, below the baseline prices.
Newsweek’s Marni Rose McFall reported that “Professor Joe Janzen of the Illinois Center for the Economics of Sustainability told Newsweek: ‘A renewed trade war would be negative for U.S. agriculture, especially corn and soybean farms who are heavily dependent on international trade.’”
Progressive Farmer’s Chris Clayton reported that “the study recaps the 2018-2019 trade war with China that led to $27 billion in lost agricultural exports in that stretch. The Trump administration responded by using the Commodity Credit Corp. to spend $23 billion on ad-hoc subsidies to farmers under the Market Facilitation Program. China responded after the trade war with record-breaking purchases that totaled $59.2 billion over a two-year stretch (2020-2021) but still fell short of the $80 billion in commitments, the study cites.”
“China still has tariffs on a broad range of U.S. agricultural products, but they sell to China under a waiver that has held those tariff rates in check,” Clayton reported. “Raw soybeans, for instance, face a 30.5% tariff that is waived down to 3% right now. Corn has a 26% tariff if it is in the quota volume that is 1% under the waiver.”
Trade war would cause a dramatic decrease in U.S. exports to China
The study found that “if China cancels its current waiver (from the 2020 Phase I agreement) and reverts to tariffs already on the books, U.S. soybean exports to China would, according to the study, fall 14 to 16 million metric tons annually, an average decline of 51.8% from baseline levels expected for those years. U.S. corn exports to China would fall about 2.2 million metric tons annually, an average decline of 84.3% from the baseline expectation.”
“A 60% retaliatory tariff level intensifies the shock, resulting in a loss of over 25 million metric tons of soybean exports to China and nearly 90% of corn exports to China,” the study said. “In this situation, the U.S. loses a combined total of 2.9 to 4.6 million metric tons of soybean plus corn exports annually, while Brazil gains an average of 8.9 million metric tons of annual soybean plus corn exports over the projection timeline.”
Trade war would benefit South America
The study found that any “American-imposed tariffs would come at a steep cost to U.S. producers while benefiting Brazil and Argentina.”
Under any of the scenarios examined of Chinese response to American tariffs, “Brazil and Argentina would increase exports and thus gain valuable global market share. Chinese tariffs on soybeans and corn from the U.S. — but not Brazil — would provide incentive for Brazilian farmers to expand production area even more rapidly than baseline growth.”
New U.S.-China trade war could cost farmers billions was originally published by Farmdoc.
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