US/China trade stoush unsettles US farmers

Henry Wells, June 18, 2018

THE United States administration announced on Friday it had set a start date for the imposition of tariffs on the US import of certain goods from China, three weeks hence, causing the wires immediately to light up.  China announced it would retaliate.

Illinois Farm Bureau sending the message to Washington on social media #TradeNotTariffs

US farm leaders, on social media using #TradeNotTariffs, have tried to convince Washington to calm, not inflame, the situation, requesting the administration considers the plight of US agricultural exports.

“Bottom line: tariff battles are never productive,” US Grains Council (USGC) president and chief executive officer Tom Sleight said.

“We trust the leaders at the US Department of Agriculture, the Office of the US Trade Representative and the White House know how critical open markets are to our industry and appreciate their support during this process and in this tense time.

“The farmers and exporters we represent have been here before regarding China and they are well aware of what it’s like to deal with tariffs, counter-tariffs and policy restrictions.

“Since 2010, we have been adversely impacted by trade policy actions by China against US distiller’s dried grains with solubles (DDGS), sorghum, ethanol and corn.

“China is a very important market for US coarse grains and their co-products, but so too is the rest of the world.

“We will stay closely engaged with the China market and its importance to US agriculture, but we will also redouble our efforts in the rest of the world to expand demand.

“We are concerned any tariff opens this market to our competitors and locking out US products doesn’t mean trade stops – it means other partners will take our place.”

USGC believes exports are vital to global economic development and to the profitability of US agriculture.

No winners in trade wars

GrainGrowers trade and economics manager Luke Mathews said in the short term other suppliers such as Australia might capitalise on trade opportunities created by disruption elsewhere, but in the long term there were no winners in trade wars.

“That is particularly the case in an instance such as this where the parties in dispute are the world’s two largest economies,” he said.

“We are strong advocates of reducing trade barriers, be they tariffs or non-tariff measures.  International trade is fundamental and we need doors to remain open because around 70 per cent of Australia’s grain production moves offshore.

“Industry spends considerable time and effort building relationships.

“It is disappointing for the commercial sector when government policy hurts those long-term relationships.”

Sorghum caught in crossfire

Market Check head of strategy, Nick Crundall, used an example of the price difference between wheat and sorghum in Queensland then and now to illustrate how the market had been affected by the tariff, or anti-dumping deposit, imposed on US sorghum shipments to China early in 2018.

“Australian sorghum prices initially rallied on the news of the announcement of the anti-dumping investigation mid-February,” Mr Crundall said.

“From February 15 when the sorghum discount to wheat in the Brisbane track market had been A$31/tonne, sorghum traded up to parity with wheat at one point before the investigation was lifted.

“While on May 18, the day the anti-dumping investigation was lifted, sorghum prices had etched back out to a $15/t discount the next trading day the spread blew out to $27/t, a $12/t change in one day, and has since continued to widen to around $40/t where it stands today.”

Though deteriorating growing conditions for the sorghum crop in New South Wales and Queensland had been a factor in the rise in sorghum prices, Mr Crundall said export demand from China was the main factor in the sorghum price rally and subsequent fall.

The domestic feed market in eastern Australia valued sorghum typically at around $45/t discount to wheat in a ration formulation.


Grain Central: Get our free daily cropping news straight to your inbox – Click here



Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


Get Grain Central's news headlines emailed to you -