Financial Times writers Colby Smith and Stephanie Stacey reported yesterday that, "The dollar hit a three-month low on Tuesday and US Treasury yields slid as investors grew increasingly confident that…
Agricultural trade issues continue to garner a substantial amount of media attention. The Commerce Department noted on Friday that surging U.S. soybean exports, spurred by the anticipation of Chinese tariffs, contributed to strong second quarter GDP growth. Meanwhile, President Trump touted an agreement with the EU to purchase more U.S. soybeans, although a subsequent report pointed out that the accord fell short of addressing broader agricultural trade disputes. Nonetheless, on Sunday’s “Face the Nation” television program, Larry Kudlow, President Trump’s economic advisor, indicated that broad discussions on agriculture will be part of the bilateral talks wth the EU.
Soybean Exports Contribute to Jump in GDP
Harriet Torry reported on the front page of Saturday’s Wall Street Journal that, “The U.S. economy grew at the fastest pace in nearly four years this spring, reflecting broad-based momentum that suggests the second-longest expansion on record isn’t yet running out of fuel.”
The Journal article pointed out that, “Trade contributed strongly to the economy’s performance.
Net exports added 1.06 percentage point to the second quarter’s 4.1% GDP growth rate, which likely reflected a surge in soybean exports as buyers abroad rushed to get their supplies before China’s 25% retaliatory tariffs on the U.S. crop hit in July.
Saturday’s article noted that, “For some Americans, trade barriers are causing anxiety. Terry Schultz, president of Madison, S.D.-based seed producer Mustang Seeds, said tariffs on U.S. soybean exports have ‘ramped up pressure on profitability’ for the farming sector, which has already been under pressure from lower commodity prices in recent years.
“‘Our sales numbers are good. What’s always a concern is the profitability of our customers and their ability to pay us,’ Mr. Schultz said.”
Larger shipments of #soybeans by Argentina, assuming a bigger crop, and Brazil expected in 2018/19, compensating for a reduction in US exports. Trade to rise to 154m t, up 2m t from 2017/18. pic.twitter.com/rLxFR0Kd5V— International Grains Council (@IGCgrains) July 27, 2018
China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S. They are being vicious in what will be their failed attempt. We were being nice - until now! China made $517 Billion on us last year.— Donald J. Trump (@realDonaldTrump) July 25, 2018
U.S. – EU Trade Agreement and Soybeans
Meanwhile, Associated Press writers Ken Thomas and Paul Wiseman reported on Wednesday that, “President Donald Trump and European leaders pulled back from the brink of a trade war over autos Wednesday and agreed to open talks to tear down trade barriers between the United States and the European Union.”
The AP article stated, “Trump also said the EU had agreed to buy ‘a lot of soybeans‘ and increase its imports of liquefied natural gas from the U.S. And the two agreed to resolve an ongoing dispute over U.S. tariffs on steel and aluminum.”
European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!— Donald J. Trump (@realDonaldTrump) July 26, 2018
Wednesday’s article added, “The EU is stepping in to ease some of U.S. farmers’ pain. Juncker said the EU ‘can import more soybeans from the U.S., and it will be done.’
“Mary Lovely, a Syracuse University economist who studies trade, said, ‘The Chinese are not going to be buying our soybeans, so almost by musical chairs our soybeans are going to Europe.’
The trouble is, China last year imported $12.3 billion in U.S. soybeans, the EU just $1.6 billion.
Soybean futures are up at a 2-week high, the morning after the EU agreed to import more soy (still waiting for the details on that) pic.twitter.com/BTgHgoz6mr— Simon Casey (@sjcasey) July 26, 2018
Bloomberg writers Alan Bjerga and Isis Almeida reported Thursday that, “The promise President Donald Trump extracted from the European Union to buy more soybeans from U.S. farmers won’t put much of a dent in the potential losses from a continuing trade war with China.
“The EU is the second-biggest buyer of the U.S. oilseed. But that is a distant second to China, which bought $12.3 billion of the U.S. soy last year compared with the $1.6 billion exported to the EU. Losses in sales to China stemming from an escalating trade spat are causing political headaches for Trump and farm state Republicans in Congress that Europe won’t be able to relieve.”
The Bloomberg writers noted that, “Even if the EU bought soybeans exclusively from the U.S., it would add about 10 million tons of demand and offset only about 35 percent of the 27 million tons of demand lost from China if the Asian nation completely halted U.S. purchases, said Michael Magdovitz, an oilseeds analyst at Rabobank International.”
And Bloomberg’s Simon Casey pointed out last week that, “The European Union will import more U.S. soybeans as part of a new accord to avoid an all-out trade war. Yet the bloc was already likely to take more American shipments.
“That’s because the 25 percent tariff China slapped on U.S. soy imports earlier this month promises to reshape the global market for the commodity. The U.S.-China tiff means it’s likely that Brazil, the No. 2 producer, will end up selling more soy to China as a result. That’s something that traders anticipate, based on the higher price Brazilian soy is fetching over U.S. supplies.
“Facing a reduced Chinese market, U.S. soybean exporters have few options other than to target the EU. And the fact that Brazilian shippers will be sending more cargoes to China means less competition in Europe. Rabobank International Ltd. predicted in June that the U.S. may overtake Brazil as the biggest soybean importer into the EU.”
Also, Reuters writer Michael Hogan reported Thursday that,
EU buyers have already been stepping up purchases, with U.S. supplies now available at a significant discount to exports from South America.
Des Moines Register writers Brianne Pfannenstiel and William Petroski reported on the front page of Friday’s paper that, “President Donald Trump displayed John-Deere-green hats bearing the slogan ‘Make Farmers Great Again‘ during his visit to Peosta Thursday, telling Iowa farmers they won’t be ‘too angry with Trump’ following an apparent trade agreement with European leaders.”
FrtPg todays @DMRegister: "@realDonaldTrump reassures #farmers at #Iowa stop," https://t.co/fTZf6pkHjh - I said to the Europeans, I said, ‘Do me a favor. Would you go out to the farms in Iowa and all the different places in the Midwest? Will you buy a lot of #soybeans right now? pic.twitter.com/HzK6YICBq7— Farm Policy (@FarmPolicy) July 27, 2018
The Register article indicated that, “Trump boasted of his verbal agreement with leaders of the European Union, (‘we’re starting the documents,’ Trump said as an aside), that would move toward the elimination of trade barriers.
“‘We just opened up Europe for you farmers,’ he said. ‘You’re not going to be too angry with Trump, I can tell you.’
‘I said to the Europeans, I said, ‘Do me a favor. Would you go out to the farms in Iowa and all the different places in the Midwest? Will you buy a lot of soybeans right now?’ Because what, that whole soybean thing is now going to be opened up. No tariffs. No nothing. Free trade.’
However, Jacob M. Schlesinger and Emre Peker reported on Friday at The Wall Street Journal Online that, “A day after President Trump hailed ‘a breakthrough agreement’ on trade with Europe, European officials said the president and his aides are exaggerating the scope of their new pact.”
More specifically, the Journal article stated, “While Mr. Trump told an Iowa crowd Thursday that ‘we just opened up Europe for you farmers,’ officials in Brussels later said he did no such thing.
“‘On agriculture, I think we’ve been very clear on that—that agriculture is out of the scope of these discussions,’ Mina Andreeva, the European Commission spokeswoman, told reporters in Brussels on Friday. ‘We are not negotiating about agricultural products,’ added Ms. Andreeva, who was part of the European delegation visiting Washington earlier this week.”
Friday’s article explained that, “Officials on both sides agree that two specific agricultural matters came up. The Europeans said they were already engaged—prior to Wednesday’s handshake at the White House—with U.S. counterparts to boost high-quality beef imports from America as part of an effort to resolve a longstanding trade dispute. And they said they would seek to buy more U.S. soybeans, a politically sensitive sector for Mr. Trump, because China has cut imports of the crop in a separate trade tiff.
“But European officials say that beyond those two specific areas, they made quite clear during the White House meeting that they would not include any broader discussion of agriculture in the pending talks.”
Wall Street Journal writer Yuka Hayashi reported on Sunday that, “A top Trump administration official said Sunday the U.S. will ‘immediately’ start negotiating with the European Union to forge trade agreements on farm and energy products, promising ‘an actual transaction’ right away to sell more soybeans, beef and liquefied natural gas to European countries.
“Larry Kudlow, President Trump’s chief economic adviser, said he would be involved in the negotiations, to be led by U.S. Trade Representative Robert Lighthizer.”
The Journal article stated that,
Mr. Kudlow stressed that broad discussions on agriculture will be part of the bilateral talks, underscoring a gap with Brussels, which has vowed to keep the sector off the table.
Sunday’s article explained, “European officials said they were already engaged in talks with the U.S. to boost beef imports and promised to seek buying more American soybeans following China’s decision to cut imports of the crop in a separate trade dispute. But European officials have said that beyond those two specific areas, they made clear to Washington they wouldn’t include any broader discussion of agriculture in the pending talks.
“Mr. Kudlow said that he didn’t ‘buy’ that argument.
“‘If ag [agriculture] is not part of it, what are soybeans doing and what’s beef doing?’ Mr. Kudlow said on ‘Face the Nation.’ ‘In the final document that was signed by both, we talked about opening markets for farmers and for workers.'”
The Journal article pointed out that, “The joint statement put out after the meeting mentioned only soybeans, not agriculture more generally, as a subject for coming discussions.”