Donald Trump’s trade war with China left American farmers dependent on government handouts to survive. But China is now at the heart of a reversal in farmers’ fortunes, as booming exports and soaring food prices fuel a recovery in the US agricultural economy.
The US is on course to ship a record $37.2bn worth of farm goods to China this year, led by sales of soyabeans, corn, tree nuts, beef, wheat and poultry, the US Department of Agriculture has forecast. The sum is 23 per cent of total US agricultural exports estimated at $164bn.
Increased demand from China, along with a supply constraints on corn and soyabeans caused by a drought in Brazil, have driven a surge in global food prices, providing a further boost for American farmers.
“Things have really turned around,” said Mark Wilson, a corn grower from Toulon, Illinois. “It’s looking pretty nice right now.”
American farmers received unprecedented government subsidies after China hit back at Trump’s tariffs with punitive levies on US farm goods in 2018. A hoped-for reprieve in early 2020, when Beijing pledged massive agricultural purchases under a trade deal with the US, quickly vanished as the pandemic spread and led Washington to deliver more aid.
Government payments drove US net farm income in 2020 to its highest level since 2013, adjusted for inflation. USDA economists forecast that income will decline 8 per cent as many of those payments disappear in 2021. But at $111.4bn, the total will still be 21 per cent higher than average annual income between 2000 to 2019.
Soyabeans, which are crushed to make pig feed and vegetable oil, have historically been the US’s biggest agricultural export to China. But China has also entered the market for US corn in a big way, with 23.2m tonnes either shipped or booked for the marketing year that ends in August, compared with less than 200,000 tonnes five years ago, government data showed.
Corn and soyabean prices this spring neared all-time highs reached when a brutal drought in the summer of 2012 devastated US production. While the growing season is early, forecasters this year expect healthy crops, enabling farmers to take advantage of soyabeans selling for more than $15 a bushel and corn above $6 a bushel.
“The handouts were just a Band-Aid to get us through, we always hoped we’d see this kind of demand and these kinds of prices,” said Dave Walton, a soyabean and corn farmer from Iowa. “We’ve got decent conditions, we just put the crop in the ground and it’s looking great right now. So there’s a lot to be thankful for.”
The US farm belt’s strong sales to China come as tensions escalate between Washington and Beijing. The Biden administration in recent days declared dozens of Chinese companies off limits to US investors over national security concerns, while most of Trump’s tariffs on Chinese goods persist.
Whether the sales would continue was “the $64,000 question that everyone wants to know the answer to”, said Scott Irwin, an agricultural economist at the University of Illinois. But he added: “I don’t see any reason that China’s buying is going to alter substantially, at least on a global scale.”
Beijing promised to import at least $80bn of US agricultural products over two years in its early 2020 trade deal with the White House. China was 22 per cent behind its commitment for 2021 as of April, but was “catching up quickly,” according to the American Farm Bureau Federation, a lobby group.
Joseph Glauber, a former chief economist at the US Department of Agriculture, was reluctant to credit the preliminary trade deal for the rising sales. He pointed to the country’s partial recovery from African swine fever, which decimated the country’s pig herd, as a force behind feed grain demand.
“I don’t think this is a temporary phenomenon,” Glauber said. “I think China will continue to be a very strong importer.”
The trade war that began in 2018 made some parts of the farm industry leery of reliance on Chinese purchases. John Baize, a consultant to the US Soybean Export Council, said diversifying demand was a “major objective”, with the industry spending on marketing in south-east Asia, north Africa and the Middle East.
“We’re very dependent on China right now,” said Baize. “But, you know, China’s heavily dependent on the rest of the world for its soyabeans too.”
The American Farm Bureau Federation said it would not be pressing Washington for more subsidies. “We’re not in the business of asking for money or the alleviation of suffering when things are going better,” Veronica Nigh, an economist with the federation, said. But she added that if exports to China were to “go south”, farmers might once again need help.
In Iowa, Walton is cautiously optimistic: “We’re going to see increased profits for sure. It’s not going to be a big windfall, or diamonds, but it’s going to be comfortably profitable for a while.”
Source: Economy - ft.com
