Question:
I have questions on China soybean import tariff.1. Because of the tariff on US soybeans, China buy soybeans from other countries. How can other countries increase their production to accommodate this sudden increase of demand? You cannot just grow more soybeans by flipping a switch. Supply and demand suggests there was an equilibrium before. Those buyers who "lose" their orders to China have to find soybeans somewhere else. Does it mean they come back to the US farmers because they are the only producers left in town?
2. China is a big soybean buyer and can move the market. Soybean prices have been fallen since the tariff announcement, factoring in the impact of the tariff. Does it mean it hurts other producers like Brazil? But why there are reports saying Brazilian farmers are happy about increase in export? They don't suddenly produce more to sell at a lower price. According to Business Insider, Brazil is estimated to produce 3.5% more year-to-year. Is it enough to cover the loss in lower prices?
3. What happens to the US unsold China-bound-supposedly soybeans? Are they sold to other nations as mentioned above, or they are left to rot?
Answer:
The policy-driven increase in the import price of U.S. soybeans into China generated a change in relative soybean prices across the globe, making U.S. soybeans relatively more expensive and soybeans of other origins, such as Brazil, relatively cheaper for the Chinese consumer. Exporting countries are ready to take over the market share lost by U.S. exporters with existing soybean inventories and bigger new crops. The U.S. government recently announced a set of measures tending to develop new markets for U.S. soybeans. If tariffs remain in place long enough, international trade patterns might change substantially, and the U.S. share of the soybean Chinese import market might shrink substantially. In the meantime, we might see some U.S. soybean find their way into China through third countries.
