Last month, the U.S. issued a statement it would be putting 30 percent tariffs on solar panels and washing machines imported from China. Less than two weeks later after the announcement, China is fighting back.
The Chinese government is conducting an anti-dumping and anti-subsidy investigation of U.S. sorghum. China’s Ministry of Commerce (MOFCOM) made the announcement of the year-long probe Sunday, saying that the grain is being exported to China at improperly low prices.
According to the U.S. Grains Council (USGC), more than three-quarters of sorghum grown in the U.S. is exported China. In 2017, the U.S. exported $1 billion or 4.8 million tons of sorghum to China.
As part of a campaign promise, the tariffs placed on Chinese solar panels and washing machines is part of President Trump’s “America First” agenda. A spokesperson for the Chinese government says the investigation is a “normal individual case of trade remedy.”
This announcement came to a shock to many in agriculture. Producers and market analysts like Chip Flory, host of AgriTalk and AgriTalk After The Bell, thought China would take a swipe at soybeans, only after metals were involved.
“It’s something we need to keep a close eye on, and all the trade issues with the Trump administration,” he said during the U.S. Farm Report roundtable taping at Top Producer Seminar in Chicago last month.
Soybeans could be the next target on the horizon. In a report from Bloomberg, Chinese leadership is looking at soybean trade with the U.S. and anti-dumping and anti-subsidy probes. China imported nearly $14 billion of U.S. soybeans last year.
“My concern is there could be a spillover effect on the soybean price,” said Darin Fessler, a senior hedging advisor at Lakefront Futures & Options.
On Tuesday, Agriculture Secretary Sonny Perdue testified before the House Agriculture Committee on the state of the farm economy. During his comments, he addressed the drastic drop in sorghum prices after China’s announcement.
“Just with a mention of China considering anti-dumping, the cash price on sorghum dropped over a dollar,” he said. “We think the sorghum issue will nullify over a period of time. It shows how fragile and sensitive the ag economy is.”
Before China’s announcement, the United Sorghum Board (USB) is expecting 6.7 million acres of the crop to be planted this year, an increase of 1 million acres from 2017.
On Monday, Tim Lust, CEO of the National Sorghum Producers (NSP), issued a statement about China’s anti-dumping investigation that reads, in part: “National Sorghum Producers is aware of this action and is prepared to participate fully in the investigations in cooperation with other sorghum industry participants…We will provide more information to our farmers and industry as it becomes available and this process moves forward.”
Despite what may come of the probe, Perdue is optimistic the U.S. will have the right tools to combat China.
“We’ve advocated on behalf of the ag economy to be prepared for any type of situation on any actions they may take,” said Perdue.