- The US is the world’s largest soy producer and historically has exported the majority of its soybeans to China.
- But after President Donald Trump’s high China tariffs resulted in a Chinese retaliation of a 25 percent import tariff on US agricultural goods last year, United States soy exports to China dropped 50 percent, and Chinese imports of Brazilian soybeans increased significantly.
- Soy production has been linked to large-scale deforestation in the Amazon rainforest and Cerrado savanna — Brazil’s two largest and ecologically most important biomes.
- If the US/China trade war continues, new research suggests that the amount of land dedicated to soy production in Brazil could increase by up to 39 percent in order to fill Chinese demand, causing new deforestation by up to 13 million hectares (50,139 square miles) of forest, an area the size of Greece, researchers estimate.
The ongoing US-China trade war, along with devastating floods in the US Midwest this Spring, are making it look like a bad year for soy exports from the United States. But the consequences might be felt more globally. A new Nature journal commentary suggests that the world’s second largest soybean producer — Brazil — could pick up the slack, leading to a rapid increase in deforestation in the Amazon basin.
In March 2018, the Trump administration imposed tariffs of up to 25 percent on Chinese imported goods. In retaliation, the Chinese government imposed tariffs of 25 percent on $110-billion worth of US goods — including soybeans, the US’s most important agricultural export crop. Now fresh demand is being placed on China’s other major soy suppliers to provide up to 37.6 million tons of the bean — the total amount imported by China in 2016.
According to researchers at the Karlsruhe Institute of Technology in Germany, the most likely option is that China’s other principal supplier of soybeans, Brazil, will substantially ramp up its production.
The authors estimate that if Brazil alone were to cover the demand, the amount of land dedicated to soy production in the Latin American nation could increase by up to 39 percent, with the loss of up to 13 million hectares (50,139 square miles) of forest, an area the size of Greece.
A global rise in soy production and consumption
Since 2000, Chinese imports of soy have skyrocketed, with increases of 200 percent from Argentina, 700 percent from the United States, and 2,000 percent from Brazil in order to meet the Asian country’s demand. Much of this exported soy is used to feed China’s hog industry — the largest in the world, and likely to become larger as the Chinese increasingly consume more meat.
“Soy [consumption] has risen exponentially in the last decade,” says Richard Fuchs, the lead author on the commentary. “It’s an important crop globally, but the entire system is so fragile that [distribution] can largely shift overnight.”
Historically, soybeans have been the US’s largest agricultural export to China. In 2017, the US exported over $12 billion worth of soybeans to China, more than half of its total soybean exports and a third of its overall production. The next largest export — cotton — was worth $1 billion. However, since Trump’s US-China trade war began in 2018, exports of US soy beans to China fell by 50 percent. Predicting how this might ultimately impact the global soy trade is somewhat tricky however, since the US being located in the Northern Hemisphere and Brazil in the South, means their soy production seasons are opposite.
“The thing you have to understand about the global soybean trade,“ said Fuchs in a Mongabay interview, “is that it is largely dominated by a few buyers, China and Europe, and only a few suppliers — Argentina, US, Brazil.”
Soy is now Brazil’s most profitable export, and poised to become larger if the US fades. However, soy production is also a leading driver of deforestation in the Latin American country. The Amazon Soy Moratorium, in which major traders voluntarily agreed not to buy soy grown on lands in Legal Amazonia deforested after July 2006, helped reduce tree-loss significantly in that biome. Statistics published by Brazil’s National Institute of Space Research (INPE) reported an 80 percent deforestation reduction there between 2000 and 2015.
However, studies show that much of the deforestation from soy merely shifted next door from the Amazon to the Cerrado — a partly wooded grassland rich in biodiversity that covers more than 20 percent of Brazil. Over half of all Brazilian soy is now grown in the Cerrado and a recent report by Global Canopy showed a direct link between savanna municipalities in Brazil with the highest levels of deforestation and with significant soy prouction.
Both the Cerrado and Amazon biomes have become increasingly threatened since the election of right-wing president Jair Bolsonaro, who ran on a platform of reducing environmental safeguards, increasing support for agribusiness, and Amazon development. The Nature commentary authors point out that the “political, legal and trade-system interventions that have prevented the expansion of soy production in the Amazon are now being weakened” by Bolsonaro.
According to data from Brazilian NGO Imazon, deforestation in the South American nation increased between February and April of 2018 as compared to the year before, coinciding with President Trump’s first threat of tariffs against China made in January.
Reordering the world soy market
Questions remain as to how much the US-China trade war will reshuffle global trade partners, especially as the Trump administration put out feelers this April for an international summit with Chinese President Xi Jinping to ease tariffs.
Soy exports from the US to the European Union — another major soybean importer — hit a record high of 9 million tons in February of this year, roughly double the amount exported through the end of February 2018, according to the USDA Foreign Agricultural Service. Still, most economic studies estimate that regardless of trade reallocations, the US soy market would suffer the most from a reshuffling of exports.
“The US is selling fewer soybeans to China and more soybeans to the rest of the world,” said Patrick Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute. “However, total US soybean exports are [being] reduced both because China is such a large part of the market, and because China has reduced its total [global] soybean imports.”
A study by researchers at Purdue University in 2018, using different economic models, found that Chinese imports from Brazil and other South American countries would increase, in Brazil’s case by as much as 9–15 percent.
Since then, distribution pattern shifts — likely instigated by the US-China tariff war — have begun to play out, as the US neared the end of its soy growing season. This February, the US shipped a little over 900,000 tons to China, just a fraction of last February’s 3.35 million tons. At the same time, Brazil soybean exports shot up to a record 6.1 million tons, more than twice the amount from the year before.
Even if a US-China trade deal is reached in coming weeks or months, the study authors point out that such export distribution shifts are often hard to reverse, especially as China finds a stable supply of soy in Brazil, allowing it to avoid the trade volatility imposed under Trump.
Floods, drought and swine fever are soy wildcards
The recent floods, which have inundated much of the US Midwest came at a critical time for US farmers. But, interestingly, a US Department of Agriculture planting intentions report suggests many farmers had already planned to shift much of their cropland from soy to corn this year, in part because of the reduction of soy prices due to the trade war.
“The impact on soybeans depends on if and when land dries out, “Westhoff said. “In a wetter-than-normal-but-not-catastrophic year, soybean acreage can actually increase, as farmers are forced to shift from corn to a crop like soybeans that can be planted later. Of course, if extremely wet conditions continue into mid-June, then soybean acreage will also be reduced.” Forecasts have warned that rainfall could bring more devastating floods this spring to the US Midwest, which if that occurs, could be a disaster for farmers there.
While most experts agree the weather damage isn’t enough yet to significantly impact the global soy market, Fuchs believes that record seesawing of weather conditions could point to one of the largest vulnerabilities of the agricultural market.
“These type of weather extremes, like floods in the United States or drought in Brazil, and the risk [of their] increase in frequency due to climate change, adds to the uncertainties in global agricultural trade and production,” Fuchs told Mongabay. “We should better prepare for those extremes and vulnerabilities, both economically and environmentally.”
There are other factors that might play into China’s demand, which fell by almost 8 percent in 2018. African swine fever, which has already wiped out at least a million hogs there, could lower demand for soy, a primary means of fattening hogs.
According to Fuchs, the EU, China and other nations should do more to acknowledge the direct effect their trade policies are having on exports and deforestation. This is especially true for a trading partner like the EU that prides itself on its progressive climate policies; a broader agenda would help shift discussions from a purely economic basis to include socio-environmental impacts.
“The realization that Europe is often importing goods from deforested land is often a muted discussion.” Says Fuchs. “It would be a first step if China or Europe were to acknowledge the role they play in tropical deforestation.”
Banner image: Soy leaves the Amazon by barge, likely for export to Europe or China. Photo credit: JuhaOnTheRoad on VisualHunt.com / CC BY-NC-SA.
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