Presidents Trump and Xi met in person during the U.S. president’s first term but have yet to do so in his second. That should change later this month.
AFP via Getty Images
The bailout of the U.S. soybean industry could be far more expensive than the $10 million to $14 million being floated by the Trump Administration.
One factor could change that: President Trump could convince Chinese President Xi Jinping to buy U.S. soybeans if they have the first in-person meeting of his second term at a forum in South Korea later this month.
That possibility aside, the data makes a pretty compelling case for a larger outlay to soybean farmers and others that began in 2018, shortly after Trump launched his initial trade war, this one focused on the U.S. trade deficit with China, with payments accelerating in 2019.
Interestingly enough, in the summer of 2018, U.S. soybean exports to the world were up 7.64%, just prior to the peak exporting season of October through January. That gain would have been greater but China had already slowed its buying leading into the peak season, with the total through July down 26.82%, according to my analysis of latest U.S. Census Bureau data.
This year is different. U.S. soybean exports to the world are not up as they were in 2018 but down 23.05% through July. The percentage drop to China this year, at 51.52%, is almost twice what it was in 2018%.
With the data not out for the peak season, that could nevertheless begin making the case for a more expensive bailout. But how much more costly? That’s not clear.
In addition to Trump meeting with Xi, that’s because it’s not clear how much of the $24 billion paid to all farmers in 2018 and 2019 through the special Market Facilitation Program went to the soybean farmers. The percentage was probably about 75%-80% of the total.
What makes the picture particularly grave, and what makes a meeting with Xi more critical, is that China has not for the first time in years put in any advance orders for U.S. soybeans this growing season, as I wrote previously.
In addition, Brazil, the world’s second-largest producer behind the United States, has supplied up to 95% of China’s needs for the early season. The Brazilian peak season is roughly a mirror of the United States’ since it is in the Southern Hemisphere.
An early signal from the Chinese came in June and then July, when there were no exports to China – the first time China bought no U.S. soybeans for two consecutive months in two decades and a factor in the 51.52% decline.
Of course, the value of summer exports is generally paltry compared to the months of October through January. No orders for the peak season is a big deal.
In fact, exports topped $1 billion for 54 out of the last 62 “peak” months until January, with seven of those eight months dating back to Trump’s first term. And therein lies the risk with the size of the bailout that will be required.
One of those eight months was in November of 2018, when the total dropped to zero, the only time that has occurred in the peak season. The next month, the total fell to $24.25 million, equal to 1.73% of all U.S. soybean exports. Traditionally, China accounts for more than 50%, sometimes as much as a percentage well into the 70s.
China accounted for 51.54% of U.S. soybean exports in 2024, the last full year. In June and July of this year, the total was zero.
ustradenumbers.com
The Chinese seem to be signaling, with no purchases in June and July – August data is scheduled for release next Tuesday – and no orders going forward, that it will attempt to exert more pressure on the United States and President Trump to reduce tariffs before a mid-November deadline Trump established after two 90-day delays.
While the United States’ tariffs on China were and are broad and far-reaching – tariffs put in place by Trump in his first term and largely kept by his successor President Joe Biden – the reciprocal tariffs from the Chinese have been more strategic and surgical.
Most of the states affected by the dearth of soybean exports to China are states that have voted for Trump and the states that received the largest payments in 2018 and 2019: Farmers in Iowa, Illinois, Minnesota, Kansas, Nebraska, Texas, Indiana, North Dakota, Missouri and Ohio all received at least $1 billion.
Further compounding the situation this year, in addition to the lack of summer purchases and orders for the peak seasons, is that U.S. soybean farmers are riding a bumper crop this year.
While there are a number of factors that point to a larger bailout for U.S. soybean farmers than in 2018, including the data, Trump does have the opportunity to encourage some late-season soybean sales to perhaps salvage what is shaping up to be an historically tough year for U.S. soybean farmers and their exports.