A rush to get soybeans out of the country ahead of retaliatory Chinese tariffs caused a spike in exports in the second quarter as farmers and grain elevators hurriedly loaded trains and ships.
Then, sales slowed to a crawl.
"We've seen a downturn in orders for new crop," said Bob Zelenka, executive director of the Minnesota Grain and Feed Association, which represents grain elevators. "We're going to be probably sitting on some soybeans this fall in storage."
When the U.S. slapped 25 percent tariffs on $34 billion in Chinese imports on July 6, China retaliated with taxes on an equal amount of U.S. products, including soybeans, pork and electric cars. China is the biggest global buyer of soybeans, while the U.S. is the largest soybean grower in the world, followed by Brazil and Argentina.
Soybean exports nearly doubled in May compared to April in anticipation of the tariffs and expected retaliation, and were up 26 percent for the year compared to 2017. Though numbers for June are not yet available, rail shipments of grain for the week ending July 7 were up 18 percent compared to the same week in 2017, widely viewed as an effort by exporters to get soybeans on a ship to China before the tariffs came crashing down.
Most of the grain left the Midwest by train to the West Coast, where it can easily be shipped to China. Soybeans grown within 100 miles of the Mississippi tend to head south on river barges, but key barge terminals in Savage have been closed because of flooding.
"If it's a place like western Minnesota or North and South Dakota or Nebraska, it's going to be railed to the Pacific Northwest where we have a bunch of export facilities near Portland and Tacoma, Wash.," said Mike Steenhoek, director of the Iowa-based Soy Transportation Council.
The rush was largely handled by big companies like Cargill, CHS and Archer Daniels Midland, that buy the grain from elevators where it is loaded onto trains. Cargill and CHS, companies based in the Twin Cities, declined interview requests about the rush to ship soybeans.
China will still have to buy soybeans from the U.S., even with the tariffs, said Zelenka, and new buyers are emerging on a small scale from places like Southeast Asia. But farmers and grain elevators are now concerned with emptying their grain bins ahead of the fall harvest, and soybean prices have fallen about $2 since May 24 to $8.31 per bushel on Monday.
In a tight-margin business, such as farming, the tariffs are going to hurt even if they don't completely halt soybean sales to China, said Steenhoek of the Soy Transportation Council.
"China doesn't have to abandon the U.S. All they have to do is curtail the amount of purchases they make to be the difference between a farmer being in the black vs. being in the red," Steenhoek said. "This whole issue with the turmoil and uncertainty in the marketplace is really serving as a pall over the entire industry."
Adam Belz • 612-673-4405 Twitter: @adambelz
