By Lloyd Phillips
Donald Trump’s inauguration as US president on Monday raises the possibility of major disruptions in global grain and oilseed prices, which could affect South African farmers.
Leading up to his inauguration for a second non-consecutive term as US president, Trump indicated that under his administration, the country may impose tariffs of up to 20% on all imports and 60% on imports from China.
Should this happen, says Wandile Sihlobo, Agbiz’s chief economist, China could retaliate as it did during Trump’s first term by imposing import tariffs on agricultural products from America.
“When Trump imposed tariffs on China in 2018, American soybean, corn, and pork farmers were among the most adversely affected. China shifted some orders to Brazil and Argentina, which then became significant soybean suppliers to China. If China retaliates against America like last time, it will harm American producers.
“This could lead to disruptions in global grain and oilseed prices. America is a significant producer, and the consequences are usually felt globally when its grain market is disrupted.”
He says American farmers may begin exploring other export markets to hedge against potential disruption of their Chinese markets. These alternative markets could include South Africa’s traditional markets in the Far East, creating unfavourable competition and downward pressure on prices for South African agricultural exports.
Sihlobo remains optimistic that Trump’s general tariff policy will have minimal direct impact on South African agriculture. Still, it remains to be seen whether Trump would impose more specific tariffs that could have a more direct effect.
“The trade fragmentation outside America strengthens my view that South Africa must diversify its agricultural export markets. In a fragmented world like today, an export-oriented sector should spend more time and resources on broadening export markets and diversifying risk.”
“South Africa’s agricultural growth depends on the country’s success in creating as many export markets as possible. South African farmers must carefully monitor formal trade policy developments in America.”
In AMT Trends’ latest video assessing grain, oilseed, and livestock markets, Dr Johnny van der Merwe and Johan Teessen say international soybean prices already declined in the days before Trump’s inauguration.
“We’ve also received reports that soybean processing units in China have withdrawn all their import contracts from America and switched to Brazil,” says Teessen.
“Yes, I think some kind of trade war will follow,” says Van der Merwe.
