Analysts: Soybean announcement less that it appears
July 30, 2018
The joint announcement last week by President Donald Trump and European Union President Jean-Claude Juncker amounted to less than it appeared, analysts and commodity news reports said over the weekend.
A number of analysts and reports noted that neither the European Union and the member states buy commodities directly because that function is handled by private sector companies.
The European countries, which import U.S. soybeans for animal feed, do not charge a tariff on U.S. soybeans, and the only real impact of the announcement is that that Juncker apparently promised not to impose a tariff.
European purchases were already likely to increase because China's decision to impose tariffs on U.S. soybeans has resulted in lower prices, which make U.S. soybeans more attractive than Brazilian ones to European buyers.
But Mother Jones, a leftist magazine, using data from the American Farm Bureau Federation, noted that the European countries are a small importer of soybeans compared with China.
Reason, an independent publication of the libertarian Reason Foundation in Los Angeles, said "to be fair, any indication of a cease fire in the trade war is welcome. But a mere handshake agreement to send more soybeans across the Atlantic won't make up for a reduction in exports across the Pacific."
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"For starters, that's because the European Commission doesn't actually have authority over how many soybeans Europe imports. It doesn't procure soybeans for European markets and it doesn't tell European businesses where to buy their soybeans.
"Of course, there are other ways that governments can encourage businesses within their borders to purchase materials from certain sources. Lowering trade barriers is one way to do it.
"If the Trump-Juncker agreement would lower European tariffs on American-grown soybeans, for example, that might do the trick of getting Europe to buy more American beans.
"Except, well, the European Commission currently doesn't charge any tariffs on American soybeans. Which means European businesses already have access to all the American soybeans they would want. It's hard to see how — short of subsidizing demand across the pond — Juncker will follow through with his promise to have Europe buy more soybeans (falling global prices might encourage more buying in Europe, but not to a significant degree).
"Rather than being an agreement to import more soybeans, it seems like Tuesday's deal was really nothing more than a pledge that Europe would not slap new tariffs on soybeans in response to American tariff-raising, like China did. Further reporting from Brussels seems to bear out that conclusion."
American Soybean Association President John Heisdorffer, an Iowa farmer, noted that the U.S. soybean crop is expected to be large this year.
"ASA thanks President Trump for this effort to increase U.S. soybean exports to the EU, as it will help soybean farmers market what is expected to be a bumper crop this fall," Heisdorffer said. "We look forward to learning the details of the agreement and working with USTR, and welcome the opportunity to deepen our relationship with our trading partners in Europe."