Soybean growers across the country are feeling the bite of the trade dispute with China, but massive piles across the Dakotas and some surrounding states are serving as a visual reminder of just how much has changed since “tariff” became as much a part of the agricultural vernacular as “harvest.”
According to the Department of Agriculture, in the last year, soybean shipments to China have fallen off 94 percent compared to the previous 12 months. At the same time, soybean production is up 4 percent, and the record 4.6 billion bushels of beans will need to go somewhere at some point. For now, storage appears to be an attractive option.
“There has been some increased commercial capacity that has been built, but also a lot of on-farm storage that was built,” Randy Gordon, president of the National Grain and Feed Association, tells Agri-Pulse. “But then again, we have the complication of the steel and aluminum tariffs that kind of factor into the affordability of doing that.”
Piles of commodities during the harvest season aren’t exactly out of the ordinary, but the reasoning for this year’s stacks is unique. For many grain elevators in the Dakotas and surrounding states, the soybean superhighway sending soybeans to export markets via the Pacific Northwest might as well be a cul-de-sac.
“The option in that part of the country is either a widening basis or no bids,” Mike Steenhoek, executive director of the Soy Transportation Coalition, said in an interview. The basis – the difference between the futures price and the cash price paid at local elevators – is also causing USDA to scratch its collective head to explore how to give producers hit by the phenomenon an extra boost through its $12 billion trade assistance package.
USDA officials have acknowledged the effort to incorporate basis concerns in the trade assistance, but say no final decision has been made. News of a second round of payments is expected in early December.
American Soybean Association President John Heisdorffer, an Iowa producer, says farmers in that region are already stretched thin with storage – there are even anecdotal reports of grain being stored in machinery sheds – and now product quality concerns are coming to the surface.
“We’ve got to get this tariff situation resolved with China, because that’s where most of those beans out of the Pacific Northwest went,” he said. “So it has backed up things and really made it tough for those guys up there.”
They’ve stored every bean they can, there’s piles of beans outside, which is only going to lead to some quality problems,” he added. If and when export markets “we’ve got to have a good quality supply to go to our customers.”
Unfortunately, resolution of the trade dispute with China may be the only real option for these billions of displaced bushels. While finding alternative export markets for these soybeans is not impossible, the current infrastructure poses a challenge.
“It is possible to get to the (Mississippi) River, but we didn’t really design a strong linkage between that origin-destination pairing, we designed it to go to the Pacific Northwest,” Steenhoek said. “That’s why you saw those billions of dollars in investment to accommodate that.”
USDA recently upped its projection for soybean ending stocks to 955 million bushels. But there are some modest improvements in other areas taking a little heat off the market.
According to USDA’s most recent Grain Transportation Report, soybean exports via interior channels – essentially via truck or rail to Canada or Mexico – are up 126 percent, with most of that going to Mexico. And the most recent World Agricultural Supply and Demand Estimates report said domestic soybean crush is “slightly higher.”
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