Soybean farmers in the Dakotas are on track to post a bumper crop, but that's little consolation given they are paying a heavy price in the ongoing trade war with China.
Last year at this time, a grain elevator just south of Hillsboro, North Dakota, had filled three trainloads of soybeans headed to the Pacific Northwest in a single week to meet orders from China. This year it's a different story, due to Beijing's 25 percent retaliatory tariffs on American soybeans that went into effect July 6.
"Now that China isn't buying any U.S. beans or very little of it, it's all backing up — especially in the Dakotas, where they've really expanded soybean acres over the years," said Terry Reilly, a senior commodity analyst at Futures International in Chicago.
North Dakota soybean farmers are especially exposed in the U.S.-China trade dispute because of their dependence on China. The state's production of soybeans has soared more than 70 percent in the past five years, fed by China's demand and rail infrastructure that allows the commodity to travel to ports in the Pacific Northwest.
"There have been no signs of demand coming back," said Nancy Johnson, executive director of the North Dakota Soybean Growers Association. "We still have seen no bids at the Pacific Northwest, which is where most of our soybeans are exported out of."
Then again, some reports suggest China might be buying U.S. beans but through backdoor channels such as Argentina, which has been a large buyer of American soy this year. Argentina had a poor crop of its own this year due to unfavorable weather, so it's been gobbling up U.S. supplies.
"Seventy percent of the soybeans leave our state for the [Pacific Northwest], and virtually 100 percent of that goes to China," said soybean grower Joe Morken, chairman of the North Dakota Soybean Council.
With the lack of soybean demand at Pacific Northwest ports, that has meant local grain elevators in the Dakotas have been lowering cash prices for beans. The price partly reflects higher transportation costs getting the product to processors and export markets.