U.S. agricultural products and political climate
U.S. agricultural products exported to China and other countries used to generate profit for the American companies. However, the situation started to change after the beginning of the trade war between the U.S. and China.
It is no secret that China was one of the biggest markets for U.S. companies. Even though trade war started in 2018, it continues to affect companies as well as farmers in the U.S. After several rounds of negotiations, there is still no indication that trade war will in the upcoming months. This is not good news for Trump Administration as he is keen to secure the second term in office.
Soybean production in 2019
The U.S. Department of Agriculture (USDA) published reports on Monday, regarding the crop production and the demand for the agricultural products. According to these reports, soybean production is going to decrease by nearly 20% in 2019. It means that the output of this soft commodity will fall to 3.68 billion bushels.
In the situation, when China stopped buying soft commodities such as soybeans, this might not be a big problem. However, it turns out that even this amount of soy will be too much to handle for U.S. farmers. Local farmers will still have a surplus of 755 million bushels, which is only less by 5% than in 2018.
Another problem for the farmers who thought to improve the situation by selling other agricultural products received terrible news. The issue is that corn prices reduced to the lowest level in nearly two months. Corn prices fell after USDA made an announcement that harvest in July surpassed the expectations. As a result, after three months of price gains, corn prices were unable to continue this positive trend.
There is another issue connected to corn production. Severe weather conditions created additional problems for U.S. farmers. According to USDA, due to floods, corn production will decrease by 8 million acres worth of harvest. Meanwhile, soybean production will fall by almost 1 million acres of harvest.
Donald Trump and soft commodities
U.S. President Donald Trump is planning to win the next presidential elections. However, the current situation might complicate his plans without the support of U.S. farmers. He might lose elections. He has to find the solution before November 2020.
As mentioned above, U.S. agricultural business such as the export of soybeans used to be a profitable business. However, due to the ongoing trade war, Brazil became the number one soybeans exporter. Export of Brazilian soy increased by 13 million tons of soybean in comparison with the export U.S. product.
It is an interesting fact that Brazilian soybean is more expensive than the one produced in the U.S. Despite this difference, China decided to import Brazilian agricultural product.
This is a tricky situation for Donald Trump. At the one hand, he does want to lose the trade war, and on the other hand, his supporters are getting angry. Trump administration tried to solve the problems by providing financial assistance to farmers. Nevertheless, it won’t be enough to end the problems caused by the trade war.
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