SPRINGFIELD – Soybean farmers in Illinois cannot catch a break.
After a promising trade deal with China last month gave farmers hope amid an intense trade war, the deadly Wuhan coronavirus currently overwhelming China is also damaging its economy.
The country’s economic slump is now sowing fears that China might not be able to buy all of the $32 billion of U.S. agricultural goods it promised for 2020, including soybeans from Illinois, America’s top soybean-producing state.
“This kind of big shock to their economy diminishes their demand for a lot of primary products” like soybeans, said Todd Hubbs, a professor of agricultural economics at the University of Illinois at Urbana-Champaign.
“There was a lot of skepticism on whether they can hit those targets,” he said. “That was before coronavirus.”
China has confirmed more than 17,000 cases of coronavirus as of Monday, including 361 deaths. The country has slowed imports and shut down much of its international trading infrastructure in order to focus on fighting the disease.
“You’ve got what looks like a pandemic, possibly, on top of an uncertain trade deal,” Hubbs said. “It’s just a lot of uncertainty.”
In 2017, the last full year before America’s trade war with China, soybeans accounted for more than half of U.S. agricultural exports to China. In 2018, soybean exports fell 75 percent as China bought from other countries in retaliation for U.S. tariffs imposed on Chinese exports.
With the signing of the first phase of the U.S.-China trade agreement last month, however, farmers finally saw light at the end of the tunnel, despite tariffs remaining until phase two is negotiated.
Now, the coronavirus outbreak has China possibly looking to revise its buying promises, according to a Bloomberg News report.
“Chinese officials are hoping the U.S. will agree to some flexibility on pledges in their phase-one trade deal,” the financial news agency reported Monday, citing unnamed sources.
A clause in the trade agreement says the two countries can consult revising the deal “in the event that a natural disaster or other unforeseeable event” threatens either country from complying.
“I do expect them to buy more than they have been under the trade war, which would be supportive of Illinois soybean growers,” Hubbs said. But he says it might not be until this fall that China begins “the real ramp-up in buying of soybeans” expected from the trade agreement.
Soybean exports to China are also recovering from an outbreak of African swine fever last year. Soybeans are a major food source for Chinese hogs, and the disease killed as many as half the country’s hog population.
Further threatening American soybean prices is Brazil, the world’s second-largest soybean producer and China’s emergency trading partner during the trade war. Brazil expects a record year of soybean production for its 2019-2020 growing season, which the USDA said could allow the South American nation to overtake the U.S. as the world’s top producer.
“A reduced demand is going to lower how much they're going to buy from us, on top of the Brazilian crop, so that pushes the price down,” Hubbs said.
Prices of soybean futures – contracts between buyers and sellers trading on international financial markets – stabilized Monday after declining for nine straight days. Soybean futures have actually declined about 7 percent on the Chicago Board of Trade since the trade agreement was signed on Jan. 15.
As for the trade war that will enter its third year this spring, the U.S. Department of Agriculture said Monday that farmers should expect to receive their third federal aid payment by the end of this week.