The threatened tariffs on Chinese goods by the USA and the retaliatory tariffs threatened by China on American products continue to roil the stock market. One continuing storyline in the mainstream media is how the Chinese action will devastate America's farmers who will lose a major export market. I've written before about how that storyline needs to be kept in perspective. Now there are two additional items that must be mentioned.
First, we keep hearing about the damage that Chinese tariffs will do to soybean farmers in the USA. That may not really be the case. The world's biggest exporter of soybeans is Brazil with the USA in second place. China is the world's biggest importer. Typically, soybeans from Brazil are less expensive than American beans but transportation costs from Brazil are a bit higher than from America. In the last few days, however, Chinese entities are making additional purchases from the Brazilian market so as to avoid the cost of the tariffs on US beans if they are, in fact, imposed by the government. As a result, the price of the Brazilian beans rose higher than those from the USA. Then, the logical result happened. European buyers who normally choose Brazilian beans bought American ones instead. In fact, the last two days saw the largest purchases of American soybeans by Europeans of the last two decades. Since soybeans are fungible, the potential tariffs just shifted the buyers from one source to another. Of course, this does not mean that there will be no disruption from the tariffs, but the actual result will have the effect of moving shipping from the Pacific northwest to America's Atlantic and Gulf ports. Soybean sales will not see as much impact as the "experts" in the media suggest.
Second, we ought to take another quick look at the pork export market. I wrote about this yesterday, and about how the impact of the Chinese tariff would be small. One reader,
Norman Ivins, commented that the largest pork producer in America, Smithfield Foods, is owned by Chinese interests. If the tariffs hurt US pork producers, Smithfield will feel the largest pain since it exports so many pigs/pork products to China. Oh, the irony of that! (Thanks, Mr. Ivins)
First, we keep hearing about the damage that Chinese tariffs will do to soybean farmers in the USA. That may not really be the case. The world's biggest exporter of soybeans is Brazil with the USA in second place. China is the world's biggest importer. Typically, soybeans from Brazil are less expensive than American beans but transportation costs from Brazil are a bit higher than from America. In the last few days, however, Chinese entities are making additional purchases from the Brazilian market so as to avoid the cost of the tariffs on US beans if they are, in fact, imposed by the government. As a result, the price of the Brazilian beans rose higher than those from the USA. Then, the logical result happened. European buyers who normally choose Brazilian beans bought American ones instead. In fact, the last two days saw the largest purchases of American soybeans by Europeans of the last two decades. Since soybeans are fungible, the potential tariffs just shifted the buyers from one source to another. Of course, this does not mean that there will be no disruption from the tariffs, but the actual result will have the effect of moving shipping from the Pacific northwest to America's Atlantic and Gulf ports. Soybean sales will not see as much impact as the "experts" in the media suggest.
Second, we ought to take another quick look at the pork export market. I wrote about this yesterday, and about how the impact of the Chinese tariff would be small. One reader,
Norman Ivins, commented that the largest pork producer in America, Smithfield Foods, is owned by Chinese interests. If the tariffs hurt US pork producers, Smithfield will feel the largest pain since it exports so many pigs/pork products to China. Oh, the irony of that! (Thanks, Mr. Ivins)
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