U.S.-China trade war puts Canadian soybean farmers at risk

We might sell more soybeans to China, but lower American prices for seed, oil and meal would likely depress prices here too

Ron Davidson of Soy Canada says Canadian soybean farmers could get side-swiped if the Chinese impose import tariffs on American soybeans in retaliation to $150 billion in proposed American tariffs on Chinese imports.

Ron Davidson isn’t exactly sure what impact Chinese tariffs on imported American soybeans will have on Canada’s soybean market, but it’s unlikely to be good.

“It just puts uncertainty into the market, and for Canada a lot of risk, because it’s next door and if they (U.S.) can’t send their soybeans abroad (to China) a place to send them is Canada, or certainly to our other export markets,” Davidson said in an interview April 6.

China says it will slap $50 billion (U.S.) import tariffs on American products including beef, pork and soybeans if the United States follows through with President Donald Trump’s plan for US$50 billion of tariffs on Chinese products shipped to the U.S.

Trump instructed U.S. trade officials to consider another $100 billion in tariffs April 5 on China after it promised to match U.S. tariffs.

Canadian soybean prices are directly tied to those in the U.S. If Chinese tariffs drive U.S. soybean futures down, Canadian soybean prices are likely to follow, Davidson said.

Lower American soybean seed, oil and meal prices could also depress Canadian canola seed, meal and oil prices, he said.

“Frankly, I don’t know what’s going to happen because China can’t simply cut off someone (like the U.S.) who sent them 35.8 million tonnes of soybeans last year,” Davidson said. “They’re not going to find them (soybeans) in Argentina because they had a drought. If Brazil would do it then they’d be shorting their normal customers. So who knows? It’s not all played out yet.”

Canada might sell more soybeans to China, but fewer elsewhere, he added. Moreover, Canada, which produced 7.7 million tonnes of soybeans in 2017, doesn’t even come close to producing the amount of soybeans the U.S. routinely exports to China, he said.

The U.S. produces around 119 million tonnes of soybeans annually and exports around 57 million tonnes, with 60 per cent going to China.

China imports around 97 million tonnes of soybeans, mostly from the U.S., Brazil and Argentina.

Last year Canada exported five million tonnes of soybeans and almost two million tonnes worth close to $1 billion went to China, Davidson said.

Not only is there a risk of more soybeans coming to Canada in the event of a U.S.-Chinese trade war, but the same for U.S. soybean meal and oil, he added.

“The bottom line is yes, there is potential opportunity for us to do better in China both on a small amount of volume and perhaps some price advantage, but in every other market the risk is down not up because if the Americans start unloading (it could disrupt) every other market including the domestic one,” Davidson said.

Trump says the U.S. will compensate American farmers if Chinese tariffs result in lower prices. That would put them at an unfair advantage over Canadian soybean growers, raising the spectre of Canada launching countervailing duties and anti-dumping measures against U.S. soybeans exported to Canada, Davidson said.

Canadian wheat farmers were side-swiped during the U.S.-European Union farm subsidy war in the late 1980s and 1990s. Canadian government farm aid couldn’t match U.S. and European subsidies.

The best outcome for Canadian soybean farmers is that the U.S. and China avoid a trade war, Davidson said.

“We need to have some certainty and predictability in the market because uncertainty is not helpful at all and disruption is not helpful,” he said. “We’re quite willing to compete. We would like international trade without tariff or non-tariff barriers. We are quite ready to compete on that basis, but when you have measures that upset the regular marketplace that’s normally a problem for us.

“Let’s hope during this little pause period here the U.S. and China can work something out. That would be the best for everybody.”

About the author


Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.



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