America’s Glaring Weak Spot in a Trade War? The Lowly Soybean
How might China respond? One possibility is soybeans. The country imported $12.4 billion of American soybeans last year to feed its pigs. China relies on these imports to keep feed prices low, which in turn keeps low the politically-sensitive price of pork. The meat is China’s staple protein, and a sizable component in household budgets.
.. But China is arguably now in a better position to handle disruption from American soy. Food price inflation has been running negative for over a year thanks to agricultural reforms, rebounding pork supply and a worldwide grain glut. The strengthening Chinese yuan is also weighing on the price of imported foodstuffs.
.. U.S. farmers’ leverage with China, meanwhile, is exceptionally weak. Farm debt is high and incomes are falling.
Global soybean prices remain mired at barely half their 2012 peak. And Brazil, America’s main competitor for the Chinese soy market, is growing another bumper crop.