The trade war between China and the United States has devolved into a shoot-out, with one commodity now positioned to help stop the crossfire: soybeans.
China isn’t buying them from the U.S. anymore, at least for now, and although President Donald Trump has talked about bailing out American soybean farmers, he hasn’t followed through yet.
New U.S. tariffs on lumber and furniture, as well as wider Chinese controls on rare-earth minerals, have heated up the political rhetoric and roiled markets.
Why We Wrote This
With harvest under way, China’s response to President Trump’s tariffs has frozen America’s soybean farmers out of the huge Chinese market. A soybean deal could lead to a broader agreement on trade.
But there are reasons the two countries could come together, and agriculture may provide the first step.
The U.S. is eager to sell, and China, presumably, is eager to buy the pea-sized yellow bean that produces vegetable oil for humans and feed for livestock. If Beijing and Washington can reach a soybean agreement in the near future, it may prove a stepping stone to a larger trade agreement. If they can’t, it may further sour relations between the two economic powers.
“It’s a game of chicken, in one sense,” says Joseph Glauber, an emeritus research fellow at the International Food Policy Research Institute and former chief economist of the U.S. Department of Agriculture. “Agriculture is the collateral damage in this trade fight with China.”
Here’s the problem: American farmers are in the midst of harvesting a bin-busting crop of soybeans – estimated at 4.3 billion bushels – almost as large as last year’s harvest. Normally, this is the time when China begins buying up those soybeans to meet its huge needs. But this year, China has bought nothing of America’s new crop, not a single U.S. soybean.
U.S. Department of Agriculture’s Foreign Agricultural Service
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Jacob Turcotte/Staff
Crop prices are down. Farm bankruptcies are rising. And with seed and other input costs so high and soybean prices sitting below $10 a bushel, “it’s pretty dark and gloomy,” says Michael Deppert, a farmer in Green Valley, Illinois. “We need all the export markets we can get.”
Pressing red states to get Trump’s attention
It’s no accident that Beijing is targeting America’s biggest export crop, grown in many Republican-leaning rural states. By hitting farmers hard, Beijing aims to pressure the Trump administration to lower its tariffs on Chinese goods.
President Trump is feeling that pressure. His administration has long promised emergency aid for soybean producers.
Mr. Trump has angered many farmers by providing economic aid for Argentina, which almost immediately responded by suspending its export taxes on soybeans and other goods. That allowed China to buy a large lot of Argentina’s soybeans at a discount, further undercutting U.S. soybean farmers. Farmer sentiment – a measure of how farmers view their financial future – fell last month, reversing all the gains it had made since Mr. Trump’s election last year, according to the Purdue University-CME Group Ag Economy Barometer Index.
But a farmer bailout wouldn’t solve the underlying issue, economists say.
When America’s soybean exports diminish, farmers in Brazil and elsewhere in the Southern Hemisphere expand their acreage and grow more soybeans for export, diminishing U.S. farmers’ market share. That’s what happened in Mr. Trump’s first trade war with China in 2018.
But farmers never fully regained their share of the Chinese market. That’s why farmers and economists say a temporary aid package, while needed, isn’t enough. The more pressing challenge is to reach an agreement with China over soybeans.
“Trade deals are definitely the first priority,” says Scott Gerlt, chief economist of the American Soybean Association (ASA) in St. Louis.
But grabbing back the huge Chinese market won’t be easy. China has been building its South American trading relationships for years. And “tariffs break trust,” as ASA President Caleb Ragland put it in an interview earlier this year. New U.S. tariffs on Chinese furniture and lumber imports, as well as expanded Chinese restrictions on rare-earth exports last week, threaten to escalate the trade war rather than diminish it.
A meeting with Mr. Xi and harvest plans
Despite ongoing trade tensions, President Trump is still slated to meet with Chinese leader Xi Jinping at the end of this month on the sidelines of the Asia-Pacific Economic Cooperation forum in South Korea, according to Treasury Secretary Scott Bessent. Soybeans will be a major topic of discussion.
The timing of this planned meeting is important for two reasons.
First, South American farmers are beginning to plant their soybean crop. If there’s no imminent sign of a U.S.-Chinese arrangement over soybeans, then they have more incentive to increase soybean acreage. That’s a long-term threat, Mr. Gerlt says, because once in cultivation, those acres don’t go away.
At the same time, China’s window of opportunity for buying American soybeans is closing. Typically, the Chinese buying starts now and lasts through February or early March, when Brazil’s harvest begins to come in. That puts pressure on both China and U.S. leaders to reach a deal sooner rather than later.
There’s some optimism that a deal can be had. President Trump is eager to jump-start soybean sales to China to shore up political support in farm country. Mr. Xi is eager to convince Mr. Trump to reduce tariffs that make Chinese goods more expensive to buy in the U.S. And he’s also likely eager to buy U.S. soybeans to fulfill his nation’s sizable needs. China imports more soybeans than all other nations combined.
“The markets are anticipating some possibility of a deal,” says Pat Westhoff, director of the Food & Agricultural Policy Research Institute at the University of Missouri. Mr. Westhoff points to the soybean futures market, which farmers use to presell a portion of their crop as insurance against potential price drops during the growing season and harvest. Soybean futures prices have not fallen by much at all.
Plummeting soybean prices
Cash soybean prices, by contrast, have plummeted, in part due to the ongoing trade tensions with China. Those are the prices farmers receive for the portion of the soybean crop that they haven’t presold. The financial stress varies by region. In North Dakota, which is highly dependent on sales to China, prices have fallen below $9 a bushel.
Nationally, the average price for breaking even in soybeans is around $12 a bushel.
The stress also varies by situation. Farmers who own all their land and equipment typically have lower costs than those who must rent land and equipment in order to farm. The number of farm bankruptcies is soaring, albeit from a low level. In the first half of this year, 181 farm bankruptcies were filed, nearly as many as in all of 2024, according to data from the Administrative Office of the United States Courts.
Last year was also a difficult one for soybean farmers. As the bad years accumulate, farmers’ financial reserves erode, Mr. Westhoff says, and their vulnerability increases. He adds: “It’s a very tough situation.”
