ELIZABETHTOWN, Pa. — China may be half a world away, but it’s hard to talk about Pennsylvania’s major ag commodities without mentioning that economic behemoth.
With 1.4 billion people to feed, China is the world’s most populous country, and it’s been an important buyer of U.S. soybeans, pork and dairy.
But Beijing lost its appetite for U.S. farm products when President Donald Trump placed tariffs on billions in Chinese exports earlier this year.
“I think we’ve got a tiger by (its) tail right now, and we just haven’t figured it out quite yet,” said Joe Kerns, a licensed broker and president of Iowa-based consulting firm Kerns and Associates.
Kerns spoke at the Alltech One Ideas Forum on Nov. 8 at Star Barn Village.
Agriculture is by no means the focal point of the U.S.-China standoff, which has seen both countries apply tariffs to a wide range of goods.
Rather, the Trump administration is trying to prevent China from appropriating U.S. companies’ intellectual property.
But this battle could scarcely come at a worse time for U.S. soybean growers.
They are expected to harvest their largest crop ever this year, and there’s still a huge amount of beans hanging around from previous years.
“We’ve got so many beans that we don’t know what to do with them,” Kerns said.
Naturally, the massive supply and the near-closing of China’s market to U.S. soybeans have resulted in discouraging prices.
Trump may not have helped matters in March when he fired off a now-infamous tweet declaring “trade wars are good, and easy to win.”
The term “trade war” is common enough, but elevating the disagreement to the level of a war could galvanize the Chinese against the United States and have long-lasting effects, Kerns said.
He prefers the term “trade dispute,” which suggests a spat with siblings, something quickly gotten over.
But if China and the United States are indeed in a trade war, the winner seems to be Brazil.
South America’s grain powerhouse rivals the U.S. in soybean production and had a very good crop this year.
That’s great news for China. By far the world’s largest importer of soybeans, it wants 100 million metric tons of the oilseed without buying from the U.S., so every bushel possible is being coaxed out of South America.
Even with drought cutting output in Argentina, another big producer, by a third, “the Chinese just might pull off what I thought was going to be completely impossible,” Kerns said.
The outlook is brighter for U.S. producers of China’s favorite meat.
African swine fever has been spreading in Europe and Asia, so if North American pork producers can keep the disease out of their farms and feed, they could prosper, Kerns said.
“African swine fever has the potential to make PED nothing more than a roadside on the way to completely higher prices,” Kerns said.
Porcine epidemic diarrhea virus, or PED, killed an estimated 7 million pigs in the first year after it was discovered in the United States, according to the National Pork Producers Council.
More than the momentary profiting from others’ misfortune, though, the American economy offers broad confidence to domestic and foreign agribusinesses.
U.S. farmers are champs in cost of production, the infrastructure system moves products from farms to end users efficiently and money flows freely into and out of the country.
Pennsylvania farmers also benefit from easy access to a huge customer base in the Northeast, Kerns said.
The world will likely need 50 percent more protein in the next 15 years to keep pace with consumers’ rising standard of living, which generally includes increasing helpings of meat.
It’s hard to know if that growth is achievable. The fastest rate of expansion in the meat industry Kerns could find was 22 percent during the booming 1990s.
Still, it’s clear that people’s demand for protein is far from exhausted.
“This is a huge opportunity for those of us in agriculture,” he said.