Recent trade tensions between the United States and several of its trading partners, most notably China, have threatened to spill over into global commodity markets and disrupt trade flows and market prices. While many agricultural commodities are potentially affected, probably none more so than soybeans. China currently accounts for two-thirds of the world’s soybean imports and the US accounts for roughly 40 percent of annual exports to China. To put this in perspective, about 25 percent of soybeans produced in the United States are exported to China.

The impact on soybean trade flows will likely be negligible over the next few months as the Southern hemisphere typically supplies China from May until September. The larger implications of the current trade tensions will be felt, however, when the US crop is harvested in autumn, which this year is likely to be a near-record. Exports from the United States that would have normally gone to China will likely be diverted to other markets, potentially displacing more traditional suppliers. To meet their protein needs, China will attempt to source soybeans from Brazil, Argentina and other suppliers such as Ukraine. This will tend to bid up prices of non-US supplies relative to soybean prices in the United States; as it is evidenced already, making US soybeans priced attractively for processors in South America. Indeed, the US Department of Agriculture reports that Argentina has recently purchased 540 000 tonnes of US new crop soybeans to help meet crushing needs caused by this year’s drought-affected crop in that country.

It is often said that there are no winners in a trade war. China processors must pay more for soybeans, which will be reflected in higher consumer prices for pork and poultry. US producers will suffer from lower prices while, in the long run, potentially losing market shares as higher soybean prices for non-US soybeans will likely result in additional land planted to soybeans in South America. The dislocations from trade wars could be large as constraints in transportation and storage facilities increase transactions costs, and smaller exporters and importers must scramble to adjust to changing trade patterns.

Transparency and clarity will help ensure that markets function efficiently even during times of tumultuous events. The current escalation of trade tensions between leading players in global commodity markets underlines the relevance of the G20-AMIS, which since its inception in 2011 has championed transparency in global food markets. AMIS is committed to play its part to ease the current trade tensions and avoid large disruptions to global food trade.