This article originally appeared in The Plain Dealer, Ohio’s largest newspaper, on July 31st, 2019.
JACKSON, Wyoming -- The trade war’s long-term legacy will be felt by our farmers for a generation. Because when President Donald Trump miscalculated that he could tweet out a 280-character tariff threat and bring China quickly to its knees, he unwittingly set in motion an expansion of soybean capacity that will permanently change global production and prices.
Second to corn, soybeans are the largest cash crop in the United States and Ohio’s largest agricultural export, by far. But soybeans are also really important to China, and this is where the president overplayed his hand. Historically our farmers have been a reliable source of cheap soybeans that are used for animal feed and cooking oil. But unlike a Boeing aircraft, which China can delay buying until the trade war ends, China’s hogs and chickens need to eat every day — something President Trump hoped would force China into immediate concessions, but that instead led the Chinese to look elsewhere for their feedstock.
Elsewhere started with Russia, China’s largest trading partner. While Russia’s total soybean exports to China remain low, at about one percent, Russia shares a 2,600-mile border with China, and was already expanding agriculture infrastructure to take advantage of the nearby Chinese market.
In response to the trade war, Russia has accelerated that expansion, opening up arable land to foreign investors, half of which is expected to go to Chinese investors. Russia has nearly doubled soybean exports to China during the last two years and will also soon complete a bridge across the Amur River, giving them a significant transportation price advantage over U.S. farmers. Meanwhile, Russia recently built three soy oil plants along the border to serve the Chinese market.
David Dodson is a former GOP primary candidate for U.S. Senate in Wyoming.
Kazakhstan, which has been clear about its desire to expand agriculture exports to China, also shares an enormous border with China and is expanding its soybean production, as well. Kazakhstan was already positioned to benefit from the logistics corridors being constructed under China’s Belt and Road Initiative, and, like Russia, has a significant transportation cost advantage over Midwest states like Ohio.
Not to miss out on a good thing, Brazil, which is currently the largest exporter of soybeans to China, is taking advantage of the prolonged trade war by accelerating infrastructure projects to bring soybeans from the interior region of Mato Grosso to the port of Itaqui, where they can be shipped economically through the Panama Canal to China.
All of this new capacity will not go away after the trade war ends, nor will China allow itself ever again to have its exports of electronics and telecommunications equipment held hostage over soybeans for their livestock. While global supply chains for iPhones are complicated and interdependent, to a Chinese pig, a Russian soybean tastes just as good as one from Mercer County.
What President Trump is learning at our farmer’s expense is that trade wars are not always “easy to win,” especially when you plan for only one response from your adversary. American farmers can hardly shoulder a long-term drop in prices — in the past five years, overall farm income has already plunged by nearly 50 percent. While the United States will likely regain much of the lost soybean volume once the trade war ends, the expanded worldwide infrastructure will almost certainly reduce long-term prices as lower-cost producers such as Russia and Kazakhstan begin to sell their yield into the Chinese market — and, for a farmer with fixed acreage, it is the price per bushel that matters most.
All of which should concern the president because the 2020 Republican electoral map looks a lot like a map of the nation’s soybean production. Donald Trump now has a net negative rating in Iowa and Ohio, two of the top ten soybean-producing states that he won in 2016.
In North Dakota and Nebraska, also states that he won, his net approval rating has dropped 17 and 22 points, respectively, since his election. If America’s farmers vote their pocketbook, Donald Trump may have a hard time reaching 270 electoral votes in 2020, but that will be small solace for our nation’s farming families whose children will now inherit his legacy.
Dave Dodson, a Republican who ran unsuccessfully last year in the GOP primary for U.S. Senate in Wyoming, is a lecturer at the Stanford Graduate School of Business.