By JACK WEATHERLY
Mississippi farmers are waiting to see how the futures market plays out as China’s threat to place a 25 percent tariff on U.S. soybeans on July 6 approaches.
It appears to be like watching a pickup plunge off a bridge in slow motion for the farmers.
Since May 25, a contract for November delivery of soybeans is down $1.30 a bushel – from $10.49 to $9.29, Dr. Josh Maples, assistant professor for agricultural economics at Mississippi State University, said on Monday.
The Chinese tariff threat comes as a result of a 25 percent tariff imposed March 1 by the United States on Chinese steel imports and a 10 percent add-on on aluminum products from that country.
President Trump is acting to correct what he sees as an unfair trade picture. The U.S. trade imbalance with China reached a record $375.2 billion last year, according to the Commerce Department.
Global oversupply of grains has pushed farm income down by half of what it was in 2013, according to the Reuters News Agency.
Soybean prices have reached their lowest point in a year on commodities markets, according to Maples.
Some farmers were able to protect themselves to some degree by locking in prices early in the year on some of their harvest, which probably will be complete by November, Maples said.
Willard Jacks, Mississippi’s representative on the U.S. Soybean Board, said on Friday that “we’ve got a couple of months to get this resolved.”
Jacks agreed that many farmers do lock in prices early on to protect themselves, along with buying options to further hedge their bet.
Jacks, chairman of the board of the Silent Shade Planting Co. of Belzoni, a 12,000-acre farmer operation with 4,000 acres in soybeans this year, said that fortunately this time of year South America is shipping soybeans to the international market.
So roughly half of the year North America exports the crop and the other half of the year South America does that.
But even with the breathing room for North American farmers, if the tariff threat is carried out, “we’ve got a mess on our hands.”
However, he said that Trump is “a tough negotiator; there’s no doubt about that.” He cited the antagonistic back and forth between the president and North Korean leader Kim Jong Il, which led to a historic summit between the two over nuclear arms.
North America will export its crop starting in the fall and ending in early spring, Jacks said.
Maples said in an email that “the U.S. exported 50 percent of its total soybean production last year. Of those exports, approximately half went to China,” “This means that about one-quarter of total U.S. soybean production was exported to China.”
Mississippi produced 115 million bushels of soybeans in 2017. The total value of Mississippi soybeans exported was $580 million in 2016 according to the latest available data, Maples said.
The nation sold China soybeans valued at $14 billion in 2017, Maples said.
“ We don’t have sufficient data to know exactly how many Mississippi soybeans were exported to China – but we know that China is the largest export market for U.S. soybeans so it is likely that a big portion of the Mississippi soybeans exported ended up in China.”
Soybeans are the biggest row crop in Mississippi. It was valued at $1.7 billion in 2017.
“While soybeans are perhaps the biggest story, given the amount the we export to China and the level of production in Mississippi, there were other commodities listed on the proposed tariff list including cotton, sorghum, wheat, beef, pork, and vegetables,”Maples said.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info