U.S. Growers Still Betting the Farm on Soybeans

U.S. farmers are gearing up to plant what could be their third-largest soybean crop ever despite failing to sell a mountain of beans from their last harvest because of a still-unresolved trade war with China.

Before the trade war, China bought $12 billion worth of soybeans a year from American farmers.

But Chinese tariffs have all but halted the trade, taking the biggest buyer out of the market and leaving farmers with crops they cannot sell. The U.S. government estimates farmers will have 900 million bushels, or approximately $8 billion worth, of last year’s soybeans in storage silos when they start harvesting the next crop.

As planting season begins, farmers will plant soy despite uncertainty over whether they will be able to sell beans to China later this year. There are simply no better options, they say.

“It is tough to rotate out of soybeans, because what else are you going to plant?” said Darin Anderson, a North Dakota farmer.

One alternative, sorghum, was also dragged into the trade war. Farmers could increase their corn acreage, but the ethanol industry is struggling. And, farmers who plant corn on the same fields two years in a row need to buy extra fertilizer and fuel. Niche crops such as hemp are expensive to start growing and have limited markets.

“Farmers have made long-term investments whether it is equipment or storage,” said Josh Gackle, also a North Dakota farmer. “All that is very specialized and the transition to something else takes a new set of investments.”

That means farmers will plant soybeans in the hope that the trade war ends, or that they will be compensated by the federal government or crop insurance.

The USDA forecasts farmers will sow 85 million acres of the oilseed this spring. That is down 4.6 percent from last year and would be the third largest U.S. area planted with soybeans.

The USDA expects soybean prices will fall in 2019 due to tariffs and rising supply. But soybean futures prices have performed relatively well. The price is up 5.3 percent since China imposed a 25 percent tariff in July.

“It is not a lot of gravy by any means,” said Austin Rincker, an Illinois farmer. “But with a good crop, we could still maintain some profitability.”

Source: Reuters