China devalues, Stops Agriculture imports

[ExFlyBoy5]

Quote:

Originally Posted by Senator I do not think any beans rot, unless a farmer refuses to sell. There is always a price. Just look at the futures market.

The markets hardly tell us the entire story.

https://www.agweb.com/article/southe...-rotting-field

[Senator]

Quote:

Originally Posted by ExFlyBoy5 The markets hardly tell us the entire story. https://www.agweb.com/article/southe...-rotting-field

You are right, that is why there is crop insurance. If the beans get harvested, they can be sold. If y ou did not buy crop insurance, it's your risk. There is no god-given right to make money as a farmer, it's no different than any other business.

At some point, all our agriculture may be outsourced to other countries where labor and environmental regulations are cheaper. Just like the manufacturing sector was.

[imoldernu]

Quote:

Originally Posted by Senator You are right, that is why there is crop insurance. If the beans get harvested, they can be sold. If y ou did not buy crop insurance, it's your risk. There is no god-given right to make money as a farmer, it's no different than any other business. At some point, all our agriculture may be outsourced to other countries where labor and environmental regulations are cheaper. Just like the manufacturing sector was.

True... current status... tough decision.... no win situation for farmers... at least here in Illinois.

https://farmdocdaily.illinois.edu/20...-illinois.html
Current:

https://farmdocdaily.illinois.edu/markets

[ExFlyBoy5]

Quote:

Originally Posted by Senator You are right, that is why there is crop insurance. If the beans get harvested, they can be sold. If y ou did not buy crop insurance, it's your risk. There is no god-given right to make money as a farmer, it's no different than any other business. At some point, all our agriculture may be outsourced to other countries where labor and environmental regulations are cheaper. Just like the manufacturing sector was.

No doubt.

[Senator]

Quote:

Originally Posted by imoldernu True... current status... tough decision.... no win situation for farmers... at least here in Illinois. https://farmdocdaily.illinois.edu/20...-illinois.html Current: https://farmdocdaily.illinois.edu/markets

Many Farmers sell their crop before they even plant with the Futures. They would have sold a few months ago at the price back then.

[eroscott]

Quote:

Originally Posted by imoldernu True... current status... tough decision.... no win situation for farmers... at least here in Illinois. https://farmdocdaily.illinois.edu/20...-illinois.html Current: https://farmdocdaily.illinois.edu/markets

Trickles effect for various other companies and local town businesses besides the two mentioned below. This is being conveniently brushed under the covers and the pro-tariff folks saying the heck with the small farmers and communities. Let them eat cake.

Quote:

China’s end to agricultural buying may also hurt sales at U.S. companies like Deere and Caterpillar, which rely on farmers for much of their business. Deere said in May that farmers were delaying buying products based on uncertainty. Shares of Moline, Illinois-based Deere dropped 4.8% Monday after reports that China would stop buying U.S. farm products. Judge pointed to the farm crisis in the 1980s, when low crop prices led to farm operators falling behind on land and equipment loans. Based on few signs of progress in trade talks, Judge said she fears a repeat of the painful decade for farmers. “We don’t want to see people losing their farms and people unable to meet your financial obligations,” she said. “But it doesn’t look like trade is going to get any better, so I think we’re in for a very rough ride.” https://www.cnbc.com/2019/08/06/chin...s-economy.html

[Montecfo]

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Originally Posted by imoldernu Early, right now, but Dow is down $600. long term? How to handle this?

Bought some bonds last week.

Market will be choppy but more rate cuts likely

[Senator]

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Originally Posted by eroscott Trickles effect for various other companies and local town businesses besides the two mentioned below. This is being conveniently brushed under the covers and the pro-tariff folks saying the heck with the small farmers and communities. Let them eat cake.

The tariffs increase the wholesale price of good a bit, and the devaluation lowers the prices. The end effect to the consumer is nil. Less than 2% of the population is involved in agriculture, so their buying power is small overall.

What is the trickle down effect of all the manufacturing having left the country over the past 25 years or so?

What is the trickle down effect of the tariffs that are applied to the USA goods imported into China for the past 25 years and the nearly $1T in trade deficit with China annually?

Imagine if all the stuff made in China was (still) made in the USA.

Americans do not mind paying more for goods made in the USA, or products made under proper labor and environmental laws. People are willing to pay more for dolphin free tuna, fair trade coffee, increased minimum wages, healthcare for employees at the stores we buy from, etc.

The agriculture issue will be resolved. Some small farmers may go broke, it may very well be that small commodity farmers are just too inefficient, they need to specialize. Or they shift products to other alternatives and green space. Just like manufacturing, most of our agriculture can be outsourced to other countries and much of it already is. We may very well be on the cusp of that trend now. Then we would be immune to any agriculture issues in regards to our products being imported into China.

[Mr._Graybeard]

Quote:

Originally Posted by Senator The tariffs increase the wholesale price of good a bit, and the devaluation lowers the prices. The end effect to the consumer is nil. Less than 2% of the population is involved in agriculture, so their buying power is small overall.

The population is small but economically and politically the sector punches above its weight. Large companies like Deere and Monsanto rely on the health of the farm economy as well as many small and medium-size towns.

Quote:

Originally Posted by Senator What is the trickle down effect of all the manufacturing having left the country over the past 25 years or so?

It's terrible, I see it all the time. Cities like Cleveland and Milwaukee have become centers of poverty. And many small towns in my area used to have manufacturing businesses that paid union-scale wages that could support a family. Of course, those employers moved first to southern non-union states in search of cheap labor before moving on to Mexico and Asia.

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Originally Posted by Senator What is the trickle down effect of the tariffs that are applied to the USA goods imported into China for the past 25 years and the nearly $1T in trade deficit with China annually?

Many North American companies that sell products in China have to agree to build their products there. Buick and Volkswagen come to mind. So they don't actually import.

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Originally Posted by Senator Americans do not mind paying more for goods made in the USA, or products made under proper labor and environmental laws. People are willing to pay more for dolphin free tuna, fair trade coffee, increased minimum wages, healthcare for employees at the stores we buy from, etc.

This statement caught my eye because it runs totally contrary to my observation. You can buy blue jeans made in America for $50-60, shoes for $200+. Those markets are dominated by manufacturing in Mexico and Asia because of the price point. Many of the manufacturers have moved on from China, they're now in Vietnam and Bangladesh.

Fair-trade food products are a small niche in the market. Look at the stores that sell them -- the organic grocery is a small storefront while Walmarts are huge. It tells you something right there.

I buy Wisconsin organic dairy products because I deplore factory farming. A half-gallon of milk is over $4. How many people are actually willing to pay that? Not many, I can tell you, because small dairy farms, organic and conventional, are going broke at a record rate up here.

Quote:

Originally Posted by Senator The agriculture issue will be resolved. Some small farmers may go broke, it may very well be that small commodity farmers are just too inefficient, they need to specialize. Or they shift products to other alternatives and green space. Just like manufacturing, most of our agriculture can be outsourced to other countries and much of it already is. We may very well be on the cusp of that trend now. Then we would be immune to any agriculture issues in regards to our products being imported into China.

American farmers, big and small, have been cutting their own throats with overproduction and the drift to two crops -- soybeans and corn. If they can't export, they're going to be in trouble.

[Senator]

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Originally Posted by Mr._Graybeard Many North American companies that sell products in China have to agree to build their products there. Buick and Volkswagen come to mind. So they don't actually import.

Therein is the crux of the issue. The companies agree to manufacture in China, because China mandates it either directly or through extremely high tariffs.

China can manufacture in the USA and avoid the tariffs too.

[misanman]

We hear a lot about the drop in soybean exports but on "The Indicator" podcast they mentioned that US wheat exports grew by 30% last year.

[joeea]

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Originally Posted by Senator Americans do not mind paying more for goods made in the USA

Right. That's why Americans never buy goods made elsewhere.

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Just like manufacturing, most of our agriculture can be outsourced to other countries and much of it already is. We may very well be on the cusp of that trend now.

Sorry. There is absolutely no evidence of any cusp or trend now.

[dixonge]

Found some extra cash, got my order in late yesterday, completed this morning. All good

[Senator]

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Originally Posted by joeea Sorry. There is absolutely no evidence of any cusp or trend now.

Pineapples, bananas, tomatoes, etc. Hawaii used to be the #1 producer of pineapples. You can barely find one grown there now. Shrimp was a product of the Gulf. Now shrimp are raised overseas. The same with many fish. Many processed foods are imported.

As environmental regulations get stronger, agriculture will take the hit, much worse than any sort of restrictions by the Chinese. Labor and land is cheaper elsewhere. Why wouldn't agriculture outsource much of the growing to other countries.

Maybe our tax rates are better for farmers than manufacturing?

[MichaelB]

When was the US largest producer of pineapples or bananas? Do you have sources for any of this?

Agriculture needs arable land and that can’t be relocated elsewhere, notwithstanding labor cost or regulatory environment. This is why major growth in agricultural production has been in Brazil, Argentina and Russia, not Asia.

[jollystomper]

Quote:

Originally Posted by MichaelB When was the US largest producer of pineapples or bananas? Do you have sources for any of this?.

Regarding pineapples, one source: https://www.tripsavvy.com/del-monte-...uction-1533628


Quote from article:

Quote:

By the middle of the 20th Century there were eight pineapple companies in Hawaii employing more than 3,000 people. Hawaii was the pineapple capital of the world growing over 80 percent of the world's pineapple. Pineapple production was Hawaii's second largest industry, second only to sugar cane. With rising costs of labor and production in the USA, this is no longer the case.

[Senator]

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Originally Posted by MichaelB When was the US largest producer of pineapples or bananas? Do you have sources for any of this? Agriculture needs arable land and that can’t be relocated elsewhere, notwithstanding labor cost or regulatory environment. This is why major growth in agricultural production has been in Brazil, Argentina and Russia, not Asia.

The entire island of Lanai (the Pineapple Island) was planted in pineapples as late as ~1985. Dole Pineapple owned most of the island. Then it was cheaper to grow them somewhere else.

My point is that we import a lot of food already. A tariff will not kill agriculture any more than the other myriad of issues that Ag faces. And just like as in manufacturing, it is cheaper to import than grow. More and more Ag will also be outsourced in due time, if not for the farm subsidies and exemption from many labor laws.

Sugar would be nearly 100% imported if not for tariffs. We will likely import more and more food and Ag products. I would guess that in time, and maybe already, it is cheaper to produce corn and soybeans from somewhere else. Especially if they somewhere else have a government subsidy.

Everyone makes a big deal about the current tariffs, but if we had a tariff reciprocity, the tariffs would be a lot higher.

Quote:

For a while, Hawaii supplied over 80% of the world’s output of canned pineapple! https://www.lovebigisland.com/quick-...aii/pineapple/

[Closet_Gamer]

Perhaps I'm a contrarian on this, but I think this is a somewhat desperate move by China.

While the Chinese government doesn't need to have short term concern for citizens' comforts in the same way we do in a democracy, over the mid-term they are responsive to broad disruptions. A sufficiently broad problem jeopardizes their control and civil peace.

A few years back there was a run of inflation and the citizens went nuts, particularly as food prices began to surge. Most of of the population does not have a lot of disposable income so the surging food prices immediately hit the kitchen table -- literally. The government had to step in and take action to quell the inflation.

So now they devalue their currency, making imports more expensive, and simultaneously restrict purchases from the most productive agriculture market in the world? This can only hurt their consumers in a material way and likely pretty quickly.

I get that they're playing chicken with Trump's upcoming election and the farm vote, but they are also playing with fire back home.

And they already have Hong Kong to deal with.

The black swan here isn't that Trump blinks or something happens to soy bean prices. The real disruption will happen if China suddenly does a very significant crack down at home or (much worse) gets more aggressive about a military confrontation with the US as a way of using nationalism to blunt citizen anger.

To the original question however...I'm doing nothing.

[Jeffman52]

Quote:

Originally Posted by ShokWaveRider Sell, Sell, Sell, No Buy, Buy, Buy, Noo Sell, Sell, Sell..... Rinse and Repeat.

Looks like my news feed on the market. OMG its crashing!!! Whew its recovered early losses. OMG its crashing!!!~!~ Ending the day having recovered all losses for the day. Rinse repeat next day.

[Mr._Graybeard]

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Originally Posted by Senator Therein is the crux of the issue. The companies agree to manufacture in China, because China mandates it either directly or through extremely high tariffs. China can manufacture in the USA and avoid the tariffs too.

The companies agree to build in China because it's profitable. It's also a growing market. The only thing that kept Buick from going the way of Olds and Pontiac was sales in China.

Certainly GM's production costs are much lower in China than they are in the US, and I believe they are importing Chinese-made vehicles now. Is that a matter of corporate survival? Is it boardroom greed? Either way, it was GM's decision.

Until we adopt a command economy like China's, we'll have to live with megacorp's decisions on where they're going to do business. And since megacorps have a powerful influence over federal policy, I don't see that coming along soon.