Source: Mac Slavo
The American farmer keeps getting bombarded with bad news, and it doesn’t look like it’ll be alleviated any time soon. The tariffs the Chinese slapped on American soybeans are corn are likely to do permanent and everlasting damage to the economy.
It’s a fear many farmers from North Dakota to Mississippi have acknowledged for the past year, according to a report by Forbes. American farmers have raised their concerns about everlasting damage because they’ve invested millions of dollars in soybean expansion because of China. Now that Chinese demand has moved to Brazil instead, that market (and their investment) may be lost for good and it can be blamed on the trade war.
China’s decision to stop buying commodities like soybeans from U.S. farmers has already done irreversible damage to the agricultural industry. Soybeans had been rotting in silos and farmers have no one to buy their goods – meaning they will likely begin missing payments if they haven’t already.
The growing risk for American agribusiness today is that much of the market share lost over the year will be hard or impossible to win back anytime soon, the Boston Consulting Group said in a report released on Wednesday. This is mostly due to long term contracts that are often signed between buyer and seller, depending on the commodity. –Forbes
China is turning to Australia, Brazil, New Zealand, Russia, and even its domestic producers as an alternative to American grown crops and animal proteins. As long term contracts are signed, American farmers are facing a long-lasting problem.
“The threat that U.S. agribusinesses will permanently lose foreign market share is not merely theoretical. In previous trade scuffles, such as one with China involving beef, the US has not regained lost share. By making U.S. crops and foodstuffs more expensive than alternatives, high tariffs lower the cost to importers of diversification. And the less faith importers have in the US as a stable supplier, in view of the potential for future trade conflicts, the more necessary it becomes for them to hedge and further diversify. Over time, importers could completely unwind complex relationships with U.S. suppliers.” – Boston Consulting Group ‘s report