Trade war draws a line between Minnesota soybean farmers, and a wide price gap appears

The trade war with China is falling hardest on soybean farmers west and northwest of the Twin Cities, who are being offered substantially less money than farmers in southern Minnesota this fall.

A wide gap has opened in soybean prices around the state just as farmers are bringing in the 2018 harvest.

Soybeans grown to the north and west of the metro area for years have been shipped to the Pacific Northwest to be loaded on ships to Asia. But China, the biggest importer of Minnesota soybeans, this summer slapped tariffs on U.S. soybeans in retaliation for those imposed by the U.S. on steel and aluminum in May.

"I've been calling them refugee soybeans. They were really grown with the intent of exporting them to China," said Mike Steenhoek, executive director of the Soy Transportation Coalition.

And those farmers simply cannot make a fast pivot away from the China market. "This whole industry in that part of the country was premised on a growing appetite for soybeans in China. Now, all of a sudden, the premise is in question," he said.

On Thursday, the cash bid for soybeans at the Red River Grain Co. in Breckenridge, Minn., on the North Dakota border, was $7 per bushel. That was 50 cents less than, or about 7 percent below, the bid price at the Byron Agri Center near Rochester.

That difference means that a farmer near Breckenridge selling soybeans there would get about $25 less revenue per acre of production than one selling beans to a buyer in Rochester.

While soybeans are a commodity with daily prices on the Chicago Board of Trade, the price that grain elevators will pay varies. It is almost always less than the price listed in Chicago, a gap that farmers refer to as "basis."

Grain elevators calculate their cash bids by starting with the price on the Chicago Board of Trade and subtracting. First they subtract the basis in the place where the grain is headed, then the cost of freight to get it there and then the 15 cents per bushel the elevator charges to make money.

In normal times, soybean prices in elevators in western Minnesota, North Dakota and South Dakota are competitive with prices elsewhere in the Midwest. Billion of dollars have been invested in rail lines and loading facilities to move soybeans grown in that part of the country to China via exporters in the Pacific Northwest.

On top of that, with the winter closure of the Upper Mississippi fast approaching, river terminals in Minnesota are buying less grain. The next best destination is St. Louis.

"Right now for soybeans, they don't even have a bid in the Pacific Northwest," said Kelly Longtin, the general manager of Red River Grain Co. "Now I've got to figure out what is my freight [expense] to get it to St. Louis."

"They're taking their chances that Trump's going to get this thing resolved in the next six months," Longtin said. "They're storing their beans."

Which elevators ship beans by rail to the Pacific, and which send it down the Mississippi River, varies by the rail line the elevator is on. Typically the dividing line is somewhere around Hwy. 71, Longtin said.

Mike Trosen, general manager of Meadowland Farmers Co-op in Lamberton, Minn., said his elevator usually ships soybeans to the Pacific and doesn't have a good rail connection to St. Louis. The elevator and local farmers are just going to have to wait out the trade dispute, he said.

"A lot of ours is going into local processors, but they buy in fits and starts as needed," Trosen said. "For the most part we're not selling any beans."

Steenhoek, of the Soy Transportation Coalition, said river terminals in Louisiana are starting to get overloaded by traffic to the Gulf of Mexico as more farm commodities head south.

Adam Belz • 612-673-4405 Twitter: @adambelz