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U.S. Farms Face Long-Term Losses From Trump Trade War, BCG Warns

Mike Dorning

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U.S. farmers and agribusinesses face a rising threat of long-term losses in export sales as President Donald Trump’s trade war with China continues, Boston Consulting Group warned in a report.

American producers are unlikely to fully regain their lost market share in China, according to Decker Walker, the firm’s global head of agribusiness and one of the study’s lead authors. “My personal view is less than half of that demand will come back, even if a trade deal is concluded in the near term,” he said.

The findings by a blue-chip management consulting firm could feed mounting fears among major U.S. agricultural players that the damage done from a tariff war that has already dragged on for more than a year will extend long after a deal is reached and a $28 billion trade aid program for farmers ends.

The hit to exports has already strained a farm sector beleaguered by a six-year slump in prices for agricultural commodities and a string of wild weather this year.

Other nations are filling the gap in China and making investments to expand their production capacity, improve transportation networks and deepen relationships with importers, eroding U.S. competitive advantages that took decades to develop, the analysis found.

It will be difficult for U.S. agriculture to find “meaningful” alternative export markets to make up losses in China because of regulatory hurdles, protectionist barriers and U.S. trade conflicts, the report added.

“The growing risk is that much of the market share abroad that U.S. agribusiness is losing to foreign competitors will be hard, if not impossible, to win back -- even if current trade conflicts are resolved to the U.S. government’s satisfaction,” the study concluded.

If Chinese customers fear more trade conflicts down the road and begin to question the U.S. as stable source for farm products, importers over time may “completely unwind complex relationships with U.S. suppliers,” the authors predicted.

Tensions between the U.S. and Beijing have escalated ahead of a planned visit to Washington by senior Chinese officials later this week to resume negotiations on the trade dispute. But China is still open to reaching a partial trade deal with the U.S., an official with direct knowledge of the talks said.

As recently as 2017, China purchased $19.5 billion in U.S. agricultural products, accounting for 14% of farm exports, according to the study. But after the trade dispute erupted, farm exports to China dropped 53% in 2018 and were down another 8% for the first seven months of 2019.

China has compensated by increasing purchases of wheat and soybeans from neighboring Russia, which now hopes to double agricultural exports to China over 10 years. Australia and Brazil “significantly” increased their share of China’s cotton market, according to the report. Brazil raised pork exports to China and is moving to authorize dozens of new meat-processing facilities.

Likewise, Brazil has been slowly displacing the U.S. in soybean sales to China and is now the nation’s top supplier, the report found.

The analysis was done by six consultants at Boston Consulting Group, including Walker and Michael McAdoo, associate director of global trade at the firm.

(Updates with Walker comments beginning in second paragraph)

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Reg Gale, Pratish Narayanan

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