Grim Outlook for Soybean Market

Plummeting soybean prices could have long-term economic impacts on North Dakota.

As a result of tariffs enacted by the Trump administration, China has greatly reduced soybean imports from the United States. Since North Dakota is one of the largest soybean growers in the U.S., a decrease in demand from China means a devastating impact on North Dakota’s agricultural sector.

William Wilson, a distinguished professor in agribusiness and applied economics at North Dakota State who speaks around the world on the issue, said the price reductions impact North Dakota perhaps more than any other state. He estimated 70 percent or more of North Dakota soybeans are exported to China.

“Soybeans is — was — probably the most profitable crop in the state,” Wilson said.

Soybean prices in North Dakota have already fallen by about 25 percent. The United States Department of Agriculture has forecasted that net farm income will decrease by $9.8 billion nationally, or 13 percent. The average loss for a North Dakota farmer is estimated to be between $100,000 and $150,000.

“There are not too many family businesses that can absorb that kind of loss,” Wilson said.

When farmers begin planting alternative crops next spring, prices will fall for those markets too. Although some believe that the tariffs’ impact can be quickly reversed, Wilson predicts the consequences of the trade war will stretch into the next three to five years.

Diverting this year’s soybean crops to a different international market is easier said than done. According to Wilson, the U.S. needs to find a home for 18 million metric tons of soybeans this year. To accomplish that, the U.S. would need to penetrate 100 percent of sales to Indonesia, Taiwan and Egypt. Complicating the problem is that the U.S. has now been labeled as an unreliable supplier, which doesn’t bode well for future trading on world markets.

“It has major implications around the world,” Wilson said.

China has expanded its domestic production of soybeans and started to focus on other sources of oilseeds, like canola and sunflower seeds. Most importantly, China has greatly increased imports from countries in South America like Brazil. China is heavily invested in Brazil’s agricultural infrastructure, which is rapidly expanding.

“They’re already planting soybeans in Brazil,” Wilson said.

Russia has also increased its soybean production and exports. Wilson said past trade restrictions on Russia provide a precedent for what will happen in the current crisis. When Russia invaded Afghanistan in 1980, the U.S. responded with a grain embargo. Russia, in turn, enlarged its grain production and is now the world’s largest exporter of wheat.

“There are not too many family businesses that can absorb that kind of loss.” –
William Wilson, professor of agribusiness and applied economics

Senior agricultural economics major Tyler Jacobson said he sees where Trump is coming from with enacting the tariffs, but he’s concerned that the administration’s actions are hurting a lot of people.

“It has a huge economic impact because there’s millions of dollars sitting in grain bins right now,” Jacobson said.

“I think it will eventually settle down once they get everything figured out,” said Chase Olson, also a senior in agricultural economics. However, he noted, “It probably scared a lot of farmers to grow something else.”

Wilson will present on the impact of falling soybean prices at the North Dakota Agricultural Association’s Northern Ag Expo Nov. 28 at the Fargodome.

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