Trade tariff retaliation already starting to bite in US

Shares in US grain trading firms have fallen amid concerns for US agricultural exports to China.

Exports of US pork to China are under threat.

Shares in grain trading firms fell yesterday amid growing concern the Trump administration’s tougher trade policies will provoke China to punish US farmers.

Shares of Bunge, the world’s largest soybean processor, declined 1.3 per cent, while Archer Daniels Midland fell 0.8 per cent after The Wall Street Journal reported Chinese officials are considering tariffs on soybeans, sorghum and pigs imported from the US. ADM and Bunge are two of the world’s largest soybean shippers, and China is far and away the world’s biggest buyer.

China may not be able to slow purchases of US soybeans for long, according to analysts at Vertical Group, a banking and research firm. The country’s need for soybeans to feed expanding livestock operations is likely too insatiable to be met exclusively by farmers in South America, a top US rival.

Reducing China’s reliance on US pigs could be easier. The country only imported about $US10 million of swine from the US last year.

And while China buys about 6 per cent of all exported pork, its farmers have been building up herds, a supply surge that has pushed prices in China 25-30 per cent lower over the past three months. Restricting pork from the US could impact big processors such as Tyson Foods, Hormel Foods and Smithfield Foods, owned by China-based WH Group. Concerns that China could curtail its buying of US agricultural goods have already weighed on crop and livestock markets in recent weeks. Lean hog futures fell almost 10 per cent in the past week. Soybean futures have also fallen.

“Bottom line, we’re terrified,” said Brian Grossman, a market strategist at Zaner Group in Chicago who used to farm in North Dakota. “It’s not going to be good for the American farmer.”

Even a temporary halt in trading with China could have major ramifications for prices and US farmers, Mr Grossman said. American farmers are expected to plant as many acres of soybeans as corn this year for the first time in 35 years.