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Veteran Advisor

China's Next Tariff Action?

Has China played it's trump card (no pun intended)? 

The US took action against Chinese theft and the Chinese retaliated against a particularly senstive but totally unrelated  segment of the U.S. economy.  They played U.S. farmers like a fish on a line for a while.  We'll buy.  Well, we won't buy as much.  We'll buy more.  Tell your government to quit being mean to us poor Chinese.  Now, we won't buy at all.  What do they have left to do?  Maybe put tariffs on some other segment of the U.S. economy?

We farmers have long known that China is a centrally managed economy.  For a long time we didn't care because we were a solution to China's problem.  They have not enough land and too much demand.  We were a reliable source of inexpensive, high-quality grain and we always were careful to thank them sincerely when they deigned to buy from us.

China is no teaching us what we really always knew - they run the show their way.

China is going to teach us to expand and develop our markets and become more competitive as a reliable source of quality protein.  China will find that when they pull the strings, the puppet may not dance as directed.  Poor China.

The Chinese lesson hurts us but in the long run it will benefit us.  Will we take advantage of our situation or will we whine and cavil about the slings and arrows of outrageous fortune?

 

 

 

21 Replies
Honored Advisor

Re: China's Next Tariff Action?

You knowwww...there are farmers or maybe disgruntled Hillary voters who just think we should Ben Dover backwards for the Chinese.."beans`d be 4 bucks higher if not for trump!!"  ...yeah, 5 years of above trend yields and there`d be "beans in the teens" Riiiiight.

I really wonder if some of these pro-Chinese farmers conduct their farm business in the same manner they want US/China trade to go, if they do it`s no different than continuing to buy seedcorn from a dealer that`s renting land away from you.

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Advisor

Re: And just how.....

And just how do you propose to take advantage of the situation?  Like maybe buying your neighbor's farm for cheap at his sale?

The fact is, even at these prices ($8) we have something like 25 million excess soybean acres.  The short crop this year will mask the full effects of that extra 25 million acres this year but what about next year?

  Sooner or later, that 25 million acres will be converted to some other crop, corn most likely or go idle.  There's already more than enough beef and milk as it is, anymore that those prices will suffer.  Marijuana is already in oversupply, I hear.  Those that have tried hemp have discovered it's drawbacks.

   So, don't keep us in  suspense, what's your magic crop that we're going to grow and restore prosperity to the farmer? 

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Advisor

Peng Dehuai

was the Chinese general who inflicted the most decisive defeat on an American army in modern times.

That army was under the command of Douglas MacArthur, another vainglorious leader.

Those who don't remember history are destined to repeat it.

Advisor

Re: Peng Dehuai

Like now, after an ignominious defeat, MacArthur returned to Washington for a massive parade.

Probably where we began the custom of celebrating our military disasters.

Highlighted
Honored Advisor

Re: And just how.....

Rick, you know how sometimes the wheat crop is going down for the 3rd time and ElCheapo says "My wheat crop sucks and it still drops a dime a day, what`s up with that???"  Then some market guru says "The world is awash in wheat! It doesn`t matter if the domestic crop is poor.  France, Ukraine, Sweden all have record crops coming" 

Well, China has to eat, as does the rest of the world, if they don`t eat ASF pork, they`ll eat chicken and chickens eat corn and soymeal.  US corn & beans will be in the mix one way or another, whether we ship beans to Argentina and the ship takes the second ramp in the traffic circle and ends up in China or if Brazil shorts it`s EU customers by selling to China and we pick up that business, food will get where it`s needed one way or another. 

In the meantime, prepare to sell $8 beans but hope for $9 or $10.  $200 rent, $50 seed, $50 chem machinery ect and 40 bushel yeild $300/acre expense divided by 40 bushel yield equals $7.50/bushel breakeven. 

I like the SF Ray Grabinsky article where he says "China isn`t buying any beans they can`t hurt us anymore ..so hit them back hard!"

https://www.agriculture.com/markets/analysis/chinas-trade-damage-to-ag-is-done-its-time-to-force-a-d...   

 

So, agriculture marches on, with China and the U.S. still playing a game of chicken in trade, with U.S. agriculture suffering the most (by design from China, who not only tariffed ag products but also banned purchases from the U.S.). This was a designed plot by China. The sooner the U.S. hits them back – hard – on all other exports to the U.S. (the other $300 billion), the better for the ag sector. I’d like to see a 5% increase, monthly, in tariffs announced on the $300 billion from China, that would continue until they make an agreement (even beyond 25%, even beyond 100%). But after agreement, the tariff level at that time would stay on for a period of one more years once the agreement is reached, and then come off 5% per month until gone.  

That would put maximum pressure on China to make a deal quickly, and also on U.S. business to move its supply chain from China to other Asian countries. That would put the maximum hurt on China quickly – and would be the greatest aid to agriculture to force a deal. But oh, how other U.S. business would howl (especially Apple)! At least if announced, we can start making plans to operate properly instead of trying to guess what government will do next.

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Veteran Advisor

Re: China's Next Tariff Action?

Knowing  the  mannerism  of  the  guy  doing  the  tariff  dance -  a  solution  being,  an  increase  in  Chapter  12 Bankruptcy  from  4  million  to  10  million  as  an  alternative -  -  -

MORE   Voodoo  Economics  -  liken  to  tariff  $$$$  in  the  US  Treasury  -  show  me  the  deposit slip please - ?   

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Advisor

Re: And just how.....

Not 100% certain that "agriculture does march on".

When people figure out that the 1/2 of 1% who farm seriously or own land were out to lunch and that the large amount of funds directed to them as rural development were misappropriated, not sure they'll react well.

Farming as we know it can't continue without a government safety net.

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Veteran Advisor

Re: And just how.....

BA  -  there  are  many  more  to  howl  than  just  Apple  - - -     

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Advisor

Re: And just how.....

well.... we're now in full "Yalu or Bust" mode whether we like it or not, under the lead of a wastrel scion of a NY organized crime family who doesn't even know that there was a Korean War.

We had one shot at this thing and it is now totally bollixed. We could have prioritized and built an alliance with the rest of the developed world to try to change China's behavior (and probably avoided retaliatory tariffs). 

RIP on that.