Tuesday
Aug062019

China stops buying US agriculture

So in July the Trump Administration seemed willing to pay farmers $16 billion dollars as a result of the Tarrif situation and trade war with China.   That's about $15 dollars an acre or $7000 per farmer, and near infinite terms and conditions apply - for example:  did your state vote red or blue - and also are you an awesome farmer and produce 200 bushes per acre or mediocre and manage 50 bushels?

Today China officially stopped buying US agriculture, which amounts to 11.3% of all US agricultural production.  11.3% doesn't sound serious, but if you have the misfortune to be growing soybeans this year - I suggest prices may well fall to about 40% of what they were last year (China usually buys 60% of US soy production).   

So, dollar calculation - will the average soybean farmer come out ahead with prices at 40% last year?  So thats $15 farm credits per acre... divided by 200 Bushels per acre on quality farmland... or $0.075 dollar credit per bushel...plus the quantity... $10.39 per bushel in Feb 2018... times 0.4... works out to a very rough estimate of $4.231 per bushel - a soy price per bushel last witnessed in 2001-2002 under Bush.   O damn.

Mediocre farmers are likely to see fatter government farm policy handouts:  At 50 bushels per acre, one would expect about a $0.30 per bushel voter retention adjustment to $4.53 per bushel.

My estimate is certainly wrong... but ouch.. be it thirty cents or seven and a half per bushel- farm aid isn't likely to make a big difference in the heartland.  The soybean price has already fallen $0.50 on China's walk-away anouncement.

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