China devalues, Stops Agriculture imports

[skipro33]

Seems to me we have been too dependent on Chinese goods if a 10% tariff on some of their goods brings down the whole house of cards. Maybe China will find other markets to buy their products, but US farmers are also finding other buyers for their products too. No one has been just sitting on their keisters here either, you just don't hear about that so much in the news.

 

[Clone]

I have no interest in going back and asking the question, but I imagine there is a lot of squirming going on back in coporateville. Major program years ago where we were resourcing to China, because 'corporate set a goal for X% to be sourced from low cost countries'. Supply chain was not going to miss their percentages, I was told point blank that they were willing to pay a 30% premium in order to hit those targets. We spent a few years trying to straighten out the crap that resulted from that circus. About the time we would get a supplier straightened out, they would jump to the automotive world (because suddenly they had their quality system working!). And we would restart the development process.

I would imagine there is a lot of work being done to resource to Vietnam and similar, Africa was supposed to be the next cheap source, and the steel probably has to got to India. How would you like to be in Corporate America today being asked to make a decision weather to pull out of China and find something different- or stay put and assume this blows over?

Maybe this will be the depth charge that knocks things loose? Time for a bunch of Roth conversions! And if the real estate market crashes, I already have a couple neighborhoods scoped out!

 

[Looking4Ward]

Stay the course.

 

[frayne]

Count me among the ones doing nothing.

+1

 

[LRDave]

Perhaps some Roth conversions now rather than December...

Excellent point! We've definitely got some to do this year due to low income.

 

[Senator]

Seems to me we have been too dependent on Chinese goods if a 10% tariff on some of their goods brings down the whole house of cards. Maybe China will find other markets to buy their products, but US farmers are also finding other buyers for their products too. No one has been just sitting on their keisters here either, you just don't hear about that so much in the news.

Exactly. The USA is the most efficient agriculture industry in the world.

Unfortunately for a US company to do business in China is very difficult. There are much higher tariffs in China. The only reason why we even manufacture in China is because the USA has banned slave labor, has stringent labor, air and water quality standards, and there is an unlimited supply of disposable workers there. When a mine collapses on people, China can just fill it in and start a new mine.

Maybe if we had reciprocal tariffs it would be best. Unfortunately, that would mean that most, if not all, Chinese imports would be manufactured here as the Chinese requires.

Wait ... what? You do realize that China is finding other markets to buy the products right. This has been in many articles. Other countries are stepping up their planning and production for the growing seasons. This could be a long term loss.

Let them find other avenues. If the USA finds other places to make our imports (like right here in the USA), China is doomed. China is worried that their nearly $1T annual USA subsidy is coming to an end. They are trying to hurt us in about the only thing that they actually import, agriculture.

 

[imoldernu]

A subtle if longer term concern.

https://www.forbes.com/sites/panosmourdoukoutas/2019/08/06/america-australia-and-japan-try-to-limit-chinas-rare-earth-dominance-it-wont-be-easy/#79786c52ab3f

A balance to the food (soybean) supply where China is moving towards S.America, but where the US offset is limited.

Re basic question, however, is whether China is manipulating its' currency, or if it is happening out of necessity.

If I were in stocks, I'd be looking at the activity over the past 6 to 8 months to determine what I call the standard deviation. I rather think that blending in a fund is not the way to go in this type of market. Rising boat?... Maybe not. Tides change the ocean water level in a day.... Global warming in a longer period.

https://www.wsj.com/articles/china-braces-itself-for-protracted-trade-dispute-with-the-u-s-11565091208

and a reinforcing article in the NYT:

https://www.nytimes.com/2019/08/06/upshot/china-us-trade-war-currency-markets.html

 

[Senator]

A subtle if longer term concern.

https://www.forbes.com/sites/panosmourdoukoutas/2019/08/06/america-australia-and-japan-try-to-limit-chinas-rare-earth-dominance-it-wont-be-easy/#79786c52ab3f

In your first link is the reason why China and other Asian countries lead manufacturing. Less regulation, slave labor. Rare earth minerals are abundant in the USA.

If we could fill in the water between all of the lesser Hawaiian islands, the USA could create a massive island for manufacturing. China has also completed this task on their own (disputed) islands, for their military.

“Further, no matter where the rare earth deposits / materials are in the world, China and other parts of Asia are the only regions where permanent magnets are manufactured – this is due to minimal labor costs and environmental regulations,

 

[W2R]

Looks like the Dow is bouncing back up, at least to some extent, already!

Well fooey! I never had a chance to go out and get that Blue Bell ice cream. Guess cyber popcorn will just have to do, for now.

 

[Nemo2]

Looks like the Dow is bouncing back up.

Watch out for dead cats!

 

[W2R]

Watch out for dead cats!

"Like a rubber ball, (they)'ll come bouncing back to you".

 

[kcowan]

My guess is the citizens have no say in the matter but the government leaders play a good game of chess with them as the pawns. There must be a significant oversupply of soybeans for a buyer to eliminate an entire country's production from their buy list.

More taxpayer money for the embattled farmers. Aren't tariffs great?

It is an expensive way to teach the administration about economics! Not to mention the stock investors.

 

[marko]

Watch out for dead cats!

Cramer predicted this last night. Dow now up 46 @ 10:20.

"An up for the open and then another down day, but then a recovery" (paraphrasing)

I don't listen to Cramer for stock picks but do like his perspectives on days like yesterday.

 

[Senator]

More taxpayer money for the embattled farmers. Aren't tariffs great?

It is an expensive way to teach the administration about economics! Not to mention the stock investors.

If the tariff would have been called a Wage Equalization Surcharge", or an "Environmental Surcharge", it would have been a more accurate description.

 

[GravitySucks]

What is not in the media is the devastation in a big swath of the farm belt from flooding this spring. A record number of acres were planted late, which reduces yield. Lots of acres never got planted. Lots of stored grain from last years crop got flooded and then rotted.
From USDA, as of June 23 the amount of corn acreage rated "good to excellent" was 21 percentage point below last year.
China shutting down their imports will be atleast partially offset by the reduced crop production this year.
One article talks about crop failures in Australia. Another talks of record crops in Brazil this year.
Place your bets.

This.
Even with the trade war Corn futures are way up. If one was to pick a good time for the China trade war than this is a good year to start it.
Question though, China is already Brazil's largest export market and soybeans their largest export. Can Brazil increase production enough to offset the U.S. Soy China imports? How many years would it take to put that many more acres into production?

 

[Chuckanut]

I don't think I'll ever see anything like a 2008 again.

In 2008 I was getting freaked out wondering if my money market fund would break the dollar (as one did). I was freaked out about my municipal bond funds (I used one of those ultra safe ones that had insurance on it before those insurance companies went bankrupt). I was worried about the major banks going under.

The stock market dropping 50%+ wasn't that scary to me compared to the other things going on which made me think the entire financial system was going to collapse.

Perhaps. But, having seen the Crash of 1974 and 2008, I would never say 'never'. Just my 2¢.

 

[Mr. Tightwad]

Bought 80 shares of RDS.B at 57.06

 

[imoldernu]

I feel like the Grinch....
... a few things... Brazil is not the only alt source for soybeans. Argentinas's exports to China rose 267% last year, and has the land capability to do far more.

Am also looking at the sequence of events preceding the Lehman crisis. Some parallels with consolidations and reinvestment in corporate America.

https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp

CLO's and Zombie Companies.

No matter whether boom or bust, always the lookback to explain... seldom the look ahead to predict.

With plenty of time on my hands, just a look around... easier when I'm not involved.

No credentials here... 'cuz I'm poor.

 

[eroscott]

If the tariff would have been called a Wage Equalization Surcharge", or an "Environmental Surcharge", it would have been a more accurate description.

That is goofy to just try to make up some new wording to trick people into thinking it is something else. "Surcharge" .... clever

a) Even Fox News is clear on this:

“But just to be clarifying, China isn’t paying these tariffs. You are. You know, indirectly and sometimes directly,” [Fox News’ Neil Cavuto] explained. “It’s passed along to you through American distributors and their counterparts in the United States that buy this stuff from the Chinese and then have to pay these surcharges. Not the Chinese government or China in particular.”

b) Tax payers paying big farm subsidies $12B and $20B due to tariff.

Rich farmers, not mom-and-pop farms, will collect most of Trump’s tariff bailout
https://www.latimes.com/business/hiltzik/la-fi-hiltzik-trump-farm-bailout-20190528-story.html

c) 12B and 20B
"The Trump administration could make as much as $20 billion available to farmers in a second round of assistance designed to help offset losses from China's latest retaliatory tariffs, Agriculture Secretary Sonny Perdue said late Wednesday.

The second installment of trade aid is being modeled after the one last year. USDA pledged up to $12 billion in assistance for 2018 production, mostly in the form of direct payments to farmers stung by retaliatory duties, as well as commodity purchases."

 

[tulak]

Yep, the system is rigged. That’s why I buy into the system.

 

[USGrant1962]

Yep, the system is rigged. That’s why I buy into the system.

+1

 

[joeea]

Cramer predicted this last night. Dow now up 46 @ 10:20.

"An up for the open and then another down day, but then a recovery"

Another down day?

 

[ExFlyBoy5]

So, how many soy beans are left to rot while the government spends BILLIONS on subsidies to these huge conglomerates? Asking for a friend...

 

[NW-Bound]

So, how many soy beans are left to rot... ?

You expect somebody to count them?

And to sort them too?

 

[Senator]

So, how many soy beans are left to rot while the government spends BILLIONS on subsidies to these huge conglomerates? Asking for a friend...

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