ASSESSMENTS

Propelled by U.S. Trade Talks, China Charts a Course to Soybean Security

Jun 28, 2019 | 19:43 GMT

A U.S. farmer in Nebraska holds soybeans from a recent harvest on May 5, 2019.

Many soybean farmers in the United States have been hit hard by China's retaliatory tariffs amid the ongoing U.S.-China trade war.

(JOHANNES EISELE/AFP/Getty Images)

Highlights

China's trade war with the United States has exposed how its large purchases of U.S. soybeans — while a key leveraging tool in its negotiations with Washington — also pose a threat to the country's food security, which has compelled Beijing to boost domestic production where it can.
Because of its land and water constraints, any increase in China's soybean production will inevitably reduce its domestic production of corn, rice and wheat — forcing Beijing to selectively increase its imports for these once self-sufficient staple grains.
As a product of its massive population's increasingly animal-based diet, China's appetite for foreign soybeans will never completely subside.
But short-term drops in domestic consumption, combined with Beijing's long-term diversification strategy, will make China less reliant on the United States for access to such a vital food staple.

Accounting for 60 percent of total global trade, China's soybean consumption has served to its benefit in certain scenarios, most evidently in its ongoing trade war with the United States. Today, Beijing makes up more than half of the United States' total soybean exports. Thus, any cuts to China's U.S. purchases would have a significant toll on U.S. farmers -- carrying with it potentially dire political consequences for U.S. President Donald Trump, who derives much of his support from rural America. But as much as China would like to continue wielding its soybean purchases as a bargaining chip, its trade disputes with Washington have also highlighted how that strategic weapon can just as easily become its Achilles heel, should Beijing become too dependent on any one food supplier -- especially one that's an adversary. This fear has spurred China in recent years to set out on a strategy to diversify its imports and "rejuvenate"...

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