Soybean farmers are still paying for Trump's trade war

The amount of soybeans sitting in storage in December hit a record high of 3.7 billion bushels, according to new data from the US Department of Agriculture. That's equivalent to about 80% of the total US harvest last year.

Even if China follows through on the additional purchases officials have pledged in trade negotiations, there could still be 900 million bushels for soybeans in storage at the end of this season -- more than the entire crop grown in Iowa, one of the biggest producers.

Farmers have been patient as tariffs have hurt their export markets. The Trump administration made $12 billion in aid available to farmers hurt by tariffs last year, which softened the blow. Plus, some demand for US soybeans shifted to other countries.

"So far, farmers don't feel the pinch directly. But if this lingers on, and we still have billions of bushels in extra supply, this could become more of a 2019 story," said Grant Kimberley, a soybean and corn farmer and director of market development at the Iowa Soybean Association.

But China was previously the biggest export market for American soybean growers.

With negotiations are ongoing, Beijing pledged -- first in December and most recently in February -- to place big orders for American soybeans. But even if they follow through, the new orders would account for only about two-thirds of what they bought in 2017, Agriculture Secretary Sonny Perdue said this week in an interview with Bloomberg.

Beijing imposed tariffs in retaliation to Trump's duties last year -- and then stopped buying soybeans altogether. Last summer, the price for American beans plummeted.

"We need to see either a promise to buy as much as they have purchased in the past or an increase," Kimberly said. "If we don't, we're going to be behind the eight-ball for several years before we'll be able to catch up."

Long-term forecasts from the Department of Agriculture project that the American soybean export market won't recover to last year's levels until 2024. But farmers like Austin Rinker in Illinois are planning to plant the same amount of soybeans this spring as they did last year.

"Last year was a good year. We shipped everything off the farm," Rincker said.

He's keeping the same crop rotation this year: half in corn, half in soybeans. Most Midwest farmers don't have a better option, Kimberley said. They mostly sell both corn and soybeans, and the corn market isn't very strong either.

There are other factors at play, too. Chinese demand for soybeans overall is expected to slow. Their farmers are using less protein in their animal feed -- which is a primary use for soybeans. Plus, African swine fever hurt their hog industry last year, so there are fewer hogs to feed.

The fate of the US soybean market going forward depends as much on the weather as anything else, said Bryce Knorr, senior grain market analyst at Farm Futures Magazine. More wet weather will make it harder to plant corn. The severe flooding in Nebraska, for example, could delay farmers there from readying their fields for spring planting of both corn and soybeans.

Soybeans don't spoil quickly. They can be kept in storage for about a year, but the beans in storage might get dumped once the new harvest comes in this year, Knorr said.

Meanwhile, Rinker is keeping is eye on the trade war -- even if he's not making any changes to his planting decisions this year.

"Farmers, without a doubt, have a lot of risk on the table. It's been a lot of wait and see for us, but they'll have to come to an agreement eventually," he said. "China was our No. 1 market."

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