Sunday, August 5, 2018

Support Livestock Farms in Trade War: China Expert

Preventing impacts on meat production is the main concern regarding soybeans in the trade war with the United States, the former president of China Agriculture University said last week.

In an article issued by Farmers Daily, a Ministry of Agriculture-controlled paper, former Ag University President (and ag economist) Ke Bingsheng said China faces a choice of stopping soybean imports from the U.S. or continuing to import them after assessing a 25% tariff. If China were to stop buying U.S. soybeans, it would be left with a 10-to-20-million-ton deficit since other countries could not increase exports enough to replace U.S. soybeans. If China continues importing U.S. soybeans the imports will be more expensive due to the 25% tax, Professor Ke said. The tax would affect consumer prices by raising the cost of soybean meal which would, in turn, raise the price of meat, according to Prof. Ke. He said Chinese experts estimate the effect on China's CPI would be 0.1% and no more than 0.4%.

Prof. Ke said the main concern is how more expensive soybeans would affect meat production. Raising the price of soybean meal could reduce the inclination of farmers to raise pigs and chickens, causing the price of meat to rise. The article warned that a small change in production can cause large changes in price, citing an 8% decrease in pork production during 2006/07 that coincided with a 60% increase in pork price.

Prof. Ke suggested that authorities consider ways to support livestock producers in a way that offsets any rise in production cost due to higher soybean meal prices. This is needed to prevent a dip in production that could have reverberations for months or years through the "cobweb" hog cycle.

The article began with standard rhetoric about "no winners in a trade war" and asserted that U.S. tariffs are politically-motivated, not economically motivated and China had to respond in kind. It reviewed the rapid growth in soybean trade, the importance of China as importer and the U.S., Brazil, and Argentina as the main exporters.

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