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China Tariffs Could Have Tremendous Impact on Arkansas Farmers

By Melanie Kramer

China recently retaliated against proposed U.S. tariffs by threatening to tax some U.S. exports, including a potential 25 percent tariff on American soybeans, which could negatively affect a high number of Arkansas growers.

“Soybeans are the second largest sector of Arkansas agriculture following poultry – a $1.6 billion industry,” says Matt King, Director of Market Information and Economics at Arkansas Farm Bureau. In the state, the Delta is the primary area for soybean production, but King says soybeans have been produced in 45 Arkansas counties.

“While the current implemented tariffs are impacting demand for U.S. pork products and grain sorghum, the impact of a 25 percent tariff particularly on soybeans and cotton would be significantly greater,” says King. King adds that the tariff impacts will be much greater this fall as the U.S. window has virtually closed by this time. “According to USDA Export Sales during the first week of April, the U.S. has completed 95 percent of its soybean sales to China,” says King.

“The U.S. exported $14.5 billion worth of soybeans to China in 2017, that is 61 percent of all U.S. soybean exports valued at $23.7 billion,” says King. “Overall, roughly one out every three rows of U.S. soybeans are exported to China.

In 2016, Arkansas total soybean production was valued at roughly $1.6 billion and soybean exports of both soybean ($863.8 million) and soybean meal ($154.6 million) were over $1 billion. “With these numbers over half of the soybeans in Arkansas are exported either as a soybean or as soybean meal (a value added product),” says King. The USDA hasn’t estimated state exports since 2016.

The current threats have reportedly driven up Chinese demand for South American soybeans and has caused other countries to come to the U.S. for their soybean needs.

King says Arkansas Farm Bureau has not yet heard a lot of concern from Arkansas farmers. “Farmers for the most part recognize that many countries participate in trade distorting practices, preventing U.S. products from entering markets and support fair trade,” he says.

That doesn’t make the potential financial impact any easier to swallow. A recent report from the University of Arkansas Division of Agriculture said that a 25 percent Chinese tariff on soybeans would result in a 14 percent loss of value. With soybeans currently selling for about $10 per bushel, that translates to a roughly $1.40 loss per bushel.

China’s tariff won’t go into effect until the end of a 60-day negotiation period, during which it could be lowered or dropped completely. If enacted, it could be a potentially devastating blow for Arkansas farmers.

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