President Trump’s $16 billion aid package for farmers hit by the trade fight may not be enough to end larger issues plaguing agriculture. Trader Scott Shellady, at TJM Brokerage, told Yahoo Finance’s The First Trade that in many ways the farm sector is a victim of its own success.
“Farmers are very efficient and they’ve been their own worst enemy over time,” he told Alexis Christoforous and Brian Sozzi. “Back in the 1930s, we were getting about 30 to 40 bushels an acre of corn. Today out of that same little acre we’re getting 200 bushels of corn.”
With better production comes lower prices, something many farms have been struggling with for decades. Good weather in recent years, coupled with strong growing seasons, have resulted in an abundance of soybeans for sale here and overseas.
“Forget about China, we’ve done too well over the last 3 or 4 years. Mother nature has been kind and we’ve had bumper crops,” Shellady says. “The soybean price was already being depressed.”
China was once the number one foreign customer for U.S. soybeans, buying some 60 percent of U.S. exports. But U.S. Department of Agriculture data shows exports to China plummeted by more than 80 percent earlier this year. Just some 5 million metric tons of U.S. soybeans were shipped to China between October, 2018 and March, 2019. A year earlier the exports topped 23.8 million metric tons.
For U.S. soy farmers, that could be devastating because it’s not clear if Chinese buyers will come back. That’s especially true if the trade fight lasts for several years. By that point, China likely will have found new suppliers for its soy needs.
“We’ve asked our largest customer to go shop elsewhere,” Shellady says. “When you put up that ‘yes, we’re open sign,’ again, and we’d like to do business, are you going to get all of your customers back? My answer would be no.”