Data Regarding the Proposition Soybean Tariffs Won’t Matter for US Soybean Prices

Some observers claimed the fungibility of soybeans would mean little impact on US soybean prices. Unless the Bloomberg terminals are being hacked by the Russians…


Source: Freitas, Durisin, Bloomberg.

From the article:

Soybean prices in the U.S. and Brazil, the nations that account for roughly 80 percent of global exports, have taken drastically different paths thanks to Donald Trump’s trade war.

In the U.S., average cash prices fell to about $7.79 a bushel this week, the lowest in almost a decade, according to an index compiled by the Minneapolis Grain Exchange. China’s tariffs on American goods including farm products have now taken effect after the U.S. implemented a raft of duties earlier in the day Friday and President Trump threatened more action.

Meanwhile in Brazil, exporters have been handed high times. Soybeans to be loaded in August at the nation’s Paranagua port fetched $2.21 a bushel more than Chicago futures as of Friday, the widest gap since data starts in 2014. The premium has more than tripled since the end of May, according to data from Commodity 3.

Two arguments were forwarded as to why prices would not be affected. The first is that US soybeans would be relabeled as non-US, i.e., smuggled. The second is that US beans would be redirected to non-China destinations, and beans that previously went to non-China destinations would go to China.

The first argument relies upon a large capacity to funnel beans through places that do not track. That seems to be an empirical question.

The second argument relies upon the US being a higher cost producer than the alternative (e.g., Brazil). This argument is formally addressed in a paper cited in this post.

It seems to be the case for now that the observers that said Chinese tariffs would not matter substantively to US soybean prices were wrong.

206 thoughts on “Data Regarding the Proposition Soybean Tariffs Won’t Matter for US Soybean Prices

  1. pgl

    “In the U.S., average cash prices fell to about $7.79 a bushel this week, the lowest in almost a decade, according to an index compiled by the Minneapolis Grain Exchange. China’s tariffs on American goods including farm products have now taken effect after the U.S. implemented a raft of duties earlier in the day Friday and President Trump threatened more action. Meanwhile in Brazil, exporters have been handed high times. Soybeans to be loaded in August at the nation’s Paranagua port fetched $2.21 a bushel more than Chicago futures as of Friday, the widest gap since data starts in 2014. The premium has more than tripled since the end of May, according to data from Commodity 3.”

    Let’s see: 2.21/7.79 = 28.37%. Both Steve and CoRev mocked the idea that this premium could come close to 25%. And now we see it has if not exceeded. Of course CoRev will find his usual way of weaseling out of this by some other patented insult. He always does!

    Reply
    1. CoRev

      Pgl, lies again. “Let’s see: 2.21/7.79 = 28.37%. Both Steve and CoRev mocked the idea that this premium could come close to 25%. And now we see it has if not exceeded. Of course CoRev will find his usual way of weaseling out of this by some other patented insult. He always does!” Show us the mocking comment(s)!

      Reply
      1. pgl

        Are really this incredibly stupid? They argued that this premium would be much lower than 25%. And here we see it indeed could be much higher than what they had claimed would happen.

        Seriously CoRev – either you have no ability to follow a conversation or no intention to be honest here. Your choice bucko – extreme stupidity on your part or blatant mendacity.

        I would think your poor mom would plea for you to stop embarrassing her this way.

        Reply
  2. pgl

    You link to your post “Are Soybean Tariffs Irrelevant?”. An excellent discussion which was worth re-reading. Alas I also re-read the comments where we see Ed Hanson and Bruce Hall go on and on with a basic message “LALALALA – we are not listening”.

    I wonder how they will react to this real world evidence of what you modeled out earlier.

    Maybe Trump should find a way of letting Brazilian farmers vote in our elections this November as they clearly are winning even as our farmers are clearly losing.

    Reply
    1. Bruce Hall

      pgl, interesting reading:
      https://www.agweb.com/article/us-trade-deficit-narrows-to-smallest-since-2016-on-soybean-exports/
      https://www.agweb.com/article/trump-trade-spat-may-see-top-soy-exporter-brazil-turn-to-imports/
      http://www.startribune.com/minnesota-soybean-farmers-have-a-problem-but-how-big/486893281/

      But I agree that tariffs are counterproductive and have written so several times. What I’d like to see is something to counter the subsidizing of industries in China which receive all manner of government aid and significant tax advantages. Perhaps the U.S. tax code should follow the European VAT model of rebating taxes on exports. U.S. industries would simply deduct profits from exports on their taxes. Then they could sell for less and be more competitive. This would apply to more than soybeans. Perhaps a blockchain system for tracking materials is all that would be necessary to verify products are being exported. In this way, for example, farmers who grow soybeans for local consumption would be taxed while farmers who designated their product for the export market would not as long as the amount of the product was blockchained to the export facility.

      Now you can argue that the income tax system is unlike the VAT, but taxes are built into U.S. products all the way from obtaining raw materials from supplier to the cost of labor to produce the finished product. So, taxes are being paid; the proposal here is that additional taxes in the form of income/profit taxes be eliminated for exports. Rather than implement tariffs (taxes), eliminate taxes on the U.S. side so that tariffs won’t seem attractive to anyone and U.S. produced products will be more competitive on the world markets.

      Is that subsidizing? Is not robbing someone subsidizing them?

      Reply
      1. pgl

        “The U.S. trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.”

        First line in your 1st link. Selling those soybeans now even though prices are low to get out ahead of the tariffs. Of course CoRev just accused me of lying as I present facts as opposed to his fantasies invented by Fox and Friends!

        Reply
      2. pgl

        Your 2nd link notes how Argentina will benefit while the 3rd story notes how soybean farmers in Minnesota will lose.

        Of course Trumpians like CoRev will accuse you of posting fake news. They really hate the real world.

        Reply
        1. pgl

          We had an interesting debate over Paul Ryan’s Destination Based Cash Flow Tax which I posted on many times over at Econospeak. My issue was that this proposal was too complex and oversold (as in Auerbach claiming it would end transfer pricing abuse). Ryan would have been better off had he honestly argued that his agenda was to impose a VAT in order to lower income taxes – which seems to be what you are saying. Alas Ryan as always is a lying gutless weasel. And his idea went down in flames in favor of the Orrin Hatch version of tax deform.

          Reply
          1. Bruce Hall

            pgl, I had an interesting discussion with an acquaintance in Georgia about the issue of the tax scheme I was proposing. He, too, thought I was supporting a VAT which I am not. This is simply a business deduction from income taxes for any income related to the final product being exported. All taxes up to the final sale would still be paid and built into the pricing of the product. So, if I bought steel to produce a product for export, the seller of the steel would still pay the normal taxes on his profits. The kicker is that in order to make this work, the product would have to be trackable via a system link blockchain which could track all inputs and the final output.

            In order to ensure no cheating (export the product for tax credit and then import it for sale at a lower price) there would have to be an auditing process for imports as well. It might be complicated in a paper-based society, but could be doable in a crypto-based system. The point is that, unlike a VAT which escalates the prices of domestically sold products (we have to assume that the VAT would be in addition to income taxes rather than a substitute since taxes never go away), this would not affect the price of domestically produced/domestically sold products while it would make exported products more competitively priced because the tax savings could be reflected in the selling price.

  3. pgl

    I have posted this before – it’s a daily chart of soybean prices dating back some 45 years. As of late May, it was showing soybeans selling for over $10 a bushel which reflects what Brazilian farmers are being paid by Chinese consumers:

    http://www.macrotrends.net/2531/soybean-prices-historical-chart-data

    Of course as Menzie has repeatedly documented, US farmers are getting less than $8 a bushel. I do not know how one can make the basic point more clearly.

    But expect the Usual Suspects to go off in their usual denial!

    Reply
    1. CoRev

      Pgl makes this claim: “Of course as Menzie has repeatedly documented, US farmers are getting less than $8 a bushel.do not know how one can make the basic point more clearly.” My claim had been that US farmers are NOT SELLING into this market. Why should they?

      My position has been you folks do not understand the actual market. Maybe you should look up the term storable.

      Reply
      1. pgl

        Where are they selling their soybeans then? Mars? I guess they are getting $20 a bushel there but Bloomberg cannot be trusted to follow the market the way CoRev does. Snicker.

        Reply
          1. baffling

            corev, you know nothing about the market. you babble incoherently about how the market works, but it is only in your mind. you slept in a holiday inn express last night, so now you are a market expert. riiiiiiiiight.

          2. CoRev

            Baffled, if I know so little, t6hen answer the question of how many FARMERS are actually selling in this market. Pgl had to use old data showing a surge in exports SHIPPED no sales to lie about his point. What are you going to use? Or are you gain going to just make ridiculous statements without any evidence.

          3. baffling

            since soybeans are not harvested until the fall, what is your point? you think prices will be higher when MORE farmers are selling at that same time?

          4. baffling

            and selling in a local market where they produce very little soybean. eastern pa is not what one considers a soybean paradise. i still think corev believes prices will strengthen as more and more farmers begin to dump their holdings. his understanding of supply and demand is outstanding.

          5. Ed Hanson

            Menzie

            I see the writer of the article you linked to, like most here, knows little about the soybean market. At least enough to ask basic questions. Such as:

            This is July and you have not harvested in this year, so how is it you have 20,000 bushels of soybeans?
            Where did you keep them since they were harvested?
            Why do you wait until March, April, or May to sell?
            Do you always sell during these months each year and why?

            The farmer had the expertise, but the writer brought little of it to his article.

            Ed

          6. CoRev

            Menzie, I had just started reading your article, when I found this: “Rinaldi said he’s thinking of selling about half his soybeans in the next four to six weeks, no matter how low the price, and then holding onto the rest for when prices rise.” Thinking about is still not selling. So even in the low volume soybean farming areas they look upon this price cut as a probable BLIP.

            so shows what the trend had been: :”Another point of reference is the mid-Atlantic states have already lowered soybean acreage for 2018. But this also shows what had been happening: “Pennsylvania farmers harvested 585,000 acres of soybeans in 2017, according to U.S. Department of Agriculture data. Just less than 30,000 acres of soybeans were harvested in Lehigh and Northampton counties in 2012,…”

            Just for Baffled, did you have a point about WESTERN PA, not E. PA or Iowa? At least get your locales consistent.

          7. CoRev

            Menzie, reaches pgl-land where exaggerations are not lies but TROOF!. Menzie’s exaggeration: ” …farmer under stress sells half, keeps some in reserve. Apparently at least one bean has been sold at the market prices…”
            One bean? Maybe, but that’s not what the farmer said in the article:
            “Rinaldi said he’s thinking of selling about half his soybeans in the next four to six weeks, no matter how low the price, and then holding onto the rest for when prices rise.”

            Why is it so necessary to support a point that is not evident in the historical data, that soybeans prices make radical price shifts, and this shift is more than just a tariff driven trend, a BLIP that will last while the tariff uncertainty does?

            Will t5he prices jump immediately back to the $10.50 price range when the uncertainty ends? No! Friday’s 1%+ price jump indicates that they can/will rise sharply even on the hint of uncertainty relaxation.

            To think otherwise is living in TDS la la land! It indicates TDS trumps objectivity, and that’s sad, especially if you are an economist.

          8. baffling

            corev, i did not bring up wpa, it was commented on by you and pgl first. i simply noted how it was not an important soybean market, as is eastern pa (where the article by menzie was published). my comment regarding iowa was simply to reference an area which should be more representative of the soybean market. my locales and discussion are quite consistent with my point regarding where the soybean market information is of most value-iowa. please keep up with the conversation.

      2. pgl

        “Maybe you should look up the term storable.”

        This is inconsistent with other market information that shows soybean exports are temporarily up. I get the concept of storing inventories but clearly you do not.

        Your mother is calling CoRev. She is tired of you embarrassing the family this way.

        Reply
      3. CoRev

        Just for pgl and the other no nothings about Farmers and what they are getting/bushel, go to this site https://www.agweb.com/markets/cash-grain-bids/ and look in you area for how many granaries actually have prices for soybeans. No current price not buying. Not buying farmers are not selling.

        If you are interested, the current spot price is: Jul-2018 874^0S +38^4

        Another point we have tried to make is that prices can and will change, sometimes radically in a short period. What is a short period for an annual crop? Herer’s a hint it is longer than a few weeks and even months when not harvest season for a storable crop.

        Reply
        1. pgl

          Since I live in Brooklyn, this site sends me to western Pennsylvania. Now WTF that does for me who knows? Certainly not an economically challenged person like CoRev.

          “Another point we have tried to make is that prices can and will change, sometimes radically in a short period.”

          WOW! No economist ever knew this before!!! CoRev thinks everyone else is stupid simply because he is incapable of making a point. DUH!

          Reply
          1. CoRev

            Brooklyn says so much of your knowledge weakness. What was the price in W.PA? Or were there there none?

          2. CoRev

            Baffled, bids are not sales, and what does Decatur Iowa have to do with W. PA,, your selected location??

      4. 2slugbaits

        CoRev Here are yesterday’s Iowa interior market prices offered to producers, so evidently some farmers are finding that they have to sell:
        https://www.ams.usda.gov/mnreports/nw_gr110.txt
        The state average was $7.74/bushel.

        We all know beans are storable (on-farm storage adds about 64 cents per bushel in net value, but volume shrinks). We also know that beans degrade in storage. We also know that soybean carryover is something like a record 445 million bushels. We also know that storage costs money. We also know that farmers are highly leveraged and under a lot of pressure to sell on the cash market because they have a lot of bills that have to be paid.

        Reply
        1. pgl

          I posted the seminal article on the issue of storage. And I bet the ranch CoRev has never read it. Which is cool as he would never get the economics.

          Reply
        2. pgl

          I noticed that this report was dated July 6, 2018 (today). And yes prices have increased a wee bit above $8 which is good news. Of course Brazilian farmers are getting $10 a bushel. The tariff is a potential explanation but CoRev is desperate to dismiss this as that it is what Team Trump pays him to do. Team Trump needs to hire better trolls.

          Reply
        3. CoRev

          2slugs, and your reference said this today: “US 1 Yellow Soybean Prices were generally 38 to 39 cents higher for a state average of 8.13” not “The state average was $7.74/bushel.”

          What you have not confirmed is how many bushels were sold at $7.74/bushel? Offering a price is no indicator of sales!

          Reply
          1. 2slugbaits

            CoRev
            The link is an active link that is updated late afternoon every day. I specifically said that it was yesterday’s price, not today’s price. At the time today’s price had not yet been posted. When I first posted the price it reflected Thursday’s price at 1:30pm CDT. At this moment the link shows Friday’s price at 1:30pm CDT.

            When looking at market prices we don’t ordinarily look at reserve prices (i.e., the price at which most farmers would like to sell), but the observed price of the marginal trader. At the margin at least some farmers were willing to sell at $7.74 yesterday and $8.13 today. That’s how markets work.

          2. pgl

            Gee CoRev – I noted how the price had increased a bit on this particular day so you are waaay late to the party. Oh wait – I must have been LYING when I noted this.

            BTW have you noticed that everyone else here has grown tired of your incessant babbling? And yet you continue. Go figure!

          3. CoRev

            2slugs, next time check you reference instead of just replicating old comments, as that one was! You mad our point that prices change, but still have not shown how many beans were sold at that price. That’s also how market s work! Show us the numbers of beans sold at what price, where and why. Is the farmer a long or short seller?

            Our position has been that prices change, and we predicted that they would be near the price at last harvest time. None of yo have ever made such a prediction, only repeated the “futures” price for a specified month, trying to tell us that TODAY’S futures price for a specific month actually reflects a prediction for that month’s actual price.

            Please, please read a business text.

          4. pgl

            You can how many trades were made by observing only the price on that day? MY OH MY – you’re a GENIUS.

          5. CoRev

            Pgl, in his infinite lying says “you can (find sic) how many trades were made by observing only the price on that day?”
            to my question of how many beans were sold at that price?
            I’m going to make it supper simple for pgl by including the entire contents of the reference.
            SHOW US OLD WISE ONE!”
            “NW_GR110
            Des Moines, IA Fri July 6, 2018 IA Dept of Ag-USDA Market News

            IA Dept. of Ag-USDA Market News Interior Iowa Daily Grain Prices

            Closing cash grain bids offered to producers as of 1:30 p.m.
            Dollars per bushel, delivered to Interior Iowa Country Elevators.

            US 2 Yellow Corn Prices were mostly 8 cents higher for a state average of 3.18.

            US 1 Yellow Soybean Prices were generally 38 to 39 cents higher for a state average of 8.13.

            Iowa Regions #2 Yellow Corn #1 Yellow Soybeans
            Range Avg Range Avg
            Northwest 3.12 – 3.25 3.20 8.02 – 8.17 8.09
            North Central 3.09 – 3.23 3.17 8.02 – 8.14 8.10
            Northeast 3.07 – 3.27 3.15 8.04 – 8.33 8.14
            Southwest 3.19 – 3.29 3.23 8.08 – 8.22 8.15
            South Central 3.11 – 3.36 3.19 8.07 – 8.22 8.15
            Southeast 3.12 – 3.34 3.19 8.10 – 8.40 8.25

            Corn basis to STATE AVERAGE PRICE for the CBOT SEP contract is -.42
            Soybean basis to STATE AVERAGE PRICE for the CBOT AUG contract is -.64

            This report was prepared by the Marketing Bureau, Iowa Department of
            Agriculture and Land Stewardship.

            Source: USDA Market News Des Moines, Iowa
            515-284-4460
            http://www.ams.usda.gov/mnreports/nw_gr110.txt

            Iowa Dept. of Agriculture and Land Stewardship
            515-281-8604
            http://www.iowaagriculture.gov/agMarketing/dailyGrainPrices.asp

            16:11 ja”

            Over and over pgl has shown he is a liar and that heactually knows nothing about this and many other subjects to which he comments. Pgl’s ALL FLUFF AND NO STUFF.

        4. pgl

          CoRev has invented a new business trick that will make these farmers rich. On the one hand, he claims they are selling their soybeans for around $8/bushel AND on the other they are storing the same bushels of soybeans.

          OK – this is not possible but read the conflicting intellectual garbage from CoRev and he is trying to have it both ways.

          Reply
      5. Dave

        >Co-morbid said “Maybe you should look up the term storable.”

        That is literally the dumbest thing I have read on the internet today. Storage is a cost. So, subtract from $8 a bushel.

        Reply
        1. CoRev

          Dave, storage also mitigates farmers’ risks. For me the dumbest thing said is: “Storage is a cost. ” while ignoring seed, fertilizer, fuel, equipment, loan interest and land costs. I see we have another pgl-level comment.

          Reply
          1. 2slugbaits

            CoRev Huh? I think Dave was pointing out that seed, fertilizer, fuel, equipment, loan interest and land costs are (in a sense) all part of storage costs. Farmers have to borrow money to pay for seed and to pay for fertilizer and to pay for fuel and to pay for equipment and to pay loan interest and to pay for land costs (including property taxes). If you keep your harvested crop in storage, then you might have a hard time paying back the bank. Essentially it’s a liquidity issue.

            BTW, storage doesn’t actually mitigate a farmer’s risk anymore than holding onto a bond or equity stock mitigates risk. What mitigates idiosyncratic risk is diversifying the kinds of crops a farmer plants.

          2. pgl

            I posted the seminal article on the storage model. Why not stop your boring babbling and actually READ it!

          3. CoRev

            2slugs, but, but but you said Iowa farmers were a single crop farmer, and implied that crop was soybeans.

            BTW, thanks for the confirmation of what I said from the beginning about how farmers mitigate risk. Don’t forget crop insurance.

          4. pgl

            No you babbling fool. You are the one ignoring that storage costs includes the opportunity cost of money aka loan interest. Could you get your head out of your arse before your next incoherent rant.

      6. Moses Herzog

        @ CoRev
        So, you’re saying 2018 is the first year farmers might use storage when prices are low?? Wow man, the wealth of knowledge you drop on this site is really hard to soak up sometimes, just on sheer magnitude alone. And of course all of these bad decisions by Donald J Orange Excrement in the White House “mean nothing” because God knows (or so the Huckabee family has passed along to us due to their direct phone-line with Jesus) because nothing helps profit margins like having your product sit in a grain silo. The farmers just tell the bankers that they can’t pay them because “our product is being stored in silos until prices recover” and all those bankers go “Cool man!!! Well forget all those bills and loan payments you owe us and the collateral required on those loans. Just call us up whenever you decide you wanna sell those soybeans!!! Us bankers are totally cool with you paying your bills whenever the F___ you feel like it. Just give us your special CoRev voucher and we’re all set”.

        Have you made so many dumb statements on this blog that you are now attempting to satirize yourself??

        Reply
  4. pgl

    MSNBC has on an analyst talking about this trade war noting the soybean market. He thinks Trump should change that hat to Make Brazil Great Again!

    Reply
  5. pgl

    Trade deficits narrows:

    https://www.bloomberg.com/news/articles/2018-07-06/u-s-trade-gap-narrows-to-smallest-since-2016-on-soybean-exports

    “The U.S. trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs… Overall exports increased 1.9 percent to $215.3 billion as soybean shipments overseas almost doubled to $4.1 billion. Exports of civilian aircraft, a category that tends to be volatile, rose $1.9 billion in May. Imports rose 0.4 percent to $258.4 billion, boosted by a record value of capital goods shipments from overseas.”

    Selling those soybeans cheaply now before the real damage from the coming trade war kicks in!

    Reply
  6. Bo Saunders

    Even though soybean prices are up 38 cents today not one single article seems to be aware of that. If it is supposed to be news why can I only find articles that are out of date? I need to know what is happening now, not yesterday or last week.

    Reply
    1. Steven Kopits

      Soybeans popped at the end of the day. I think sentiment has been quite bearish, with everyone holding out to see where a bottom develops. In a commodity market, though, the price differential to the same commodity in other markets (eg, Brazil) is hard to hold open. Both financial and physical arbitrage forces will look to make money exploiting that differential.

      So it’s hard to say. For all I know, the Bank of China may have been selling US soybean futures to depress the price. (I might have done that.) But you can’t keep the door open forever, because capital starts flooding in sooner or later.

      For now, I think we can say that China tariffs have had a visible effect on US soybean prices, although this effect may be principally driven by its effect on investor sentiment rather than market fundamentals. In theory, the price pops back up to the difference in logistics and administrative costs. Hasn’t done that yet, though, to be sure.

      https://www.barchart.com/futures/quotes/ZSN18/interactive-chart

      Reply
      1. 2slugbaits

        One of those market fundamentals is that soybeans face a downward sloping demand curve, which means an upward shift in the supply curve because an import tariff will increase the cost to supply. How much of a reduction depends on the elasticities. One 2009 University of Illinois study estimates that China’s elasticity for soybean demand is 0.778. https://ageconsearch.umn.edu/bitstream/49490/2/MasudaGoldsmith_609089AAEA20090501.pdf
        So a rough back-of-the-envelope calculation says that a 25% tariff should reduce Chinese demand by 19.45%.

        Reply
        1. CoRev

          2slugs, almost correct, again! “One of those market fundamentals is that (US) soybeans face a (threat of a) downward sloping demand curve, which means an upward shift in the supply curve (if China does not import from other international supplies) because an import tariff will increase the cost to supply (of Chinese users for importing soybeans from US markets).”

          You forget that in international markets at near Supply/Demand equilibrium, the new Chinese demand will cause other users to fill demand from other major suppliers. One of which is…?

          It’s how markets work! Please read a business text.

          Reply
          1. pgl

            “It’s how markets work! Please read a business text.”

            This from the know nothing who has never read Fama (1970) or that Deaton article on the storage model. We asked you before which text you want us to read. Oh yea – it’s The Cat in the Hat!

        2. Steven Kopits

          Slugs –

          I personally have found price elasticities hard to use in practice. Consider: In the last year, the oil supply is up, oil demand is up even more, and prices are up even more. Thus, the price elasticity of demand is positive! As the price increases, people are demanding more oil!

          Of course, this is not really the case. Rather, strong demand is driving up prices, which may be depressing relative demand growth (ie, demand might have grown more at lower prices).

          On the other hand, if there were a supply outage, we would also see a price rise, but volumes falling, therefore seeing a negative price elasticity of demand.

          So, to quote Scott Sumner once again, “Never reason from a price change.” The price is dependent on relative supply and demand growth, and possibly on investor appetite for related financial securities. Using price elasticities depends on understanding which regime you are in, and if you understand that, then elasticities don’t provide much additional insight in my experience.

          Reply
      1. pgl

        This is something CoRev needs to read SLOWLY. Let us help him with two key lines:

        “The tariff implementations mark the first material movements in a face-off between the world’s largest economies that has pushed soybean prices down nearly 20% since March, when the Trump administration announced plans to penalize China for what US officials found to be “unfair” trade practices.”

        CoRev the Nobel Prize winner just lectured us that prices can change quickly. No kidding – a 20% drop is in a few months is a big change. Which of course is our point! And this:

        “The US shipped more soybeans than usual in May as markets poised for a trade war. Exports of the legume jumped by $2 billion from April, the Commerce Department said Friday. “The story presumably is that Chinese importers have been buying U.S. soy ahead of the imposition of tariffs – effective today – in retaliation for U.S. tariffs on Chinese goods,” said Ian Shepardson, chief economist at Pantheon Macroeconomics.”

        CoRev is on this theme that farmers are not selling their products at these depressed prices as they are storing soybeans in inventory. Of course this says just the opposite. Granted CoRev does not live in the real world so he can make up fantasies as he goes!

        Reply
        1. Moses Herzog

          @ pgl
          It’s a business that gets buy every year on roughly a 2–3% profit margin. How many farmers are going to take a significant portion of their product and put it in a silo when margins are at 2–3%?? I think farmers are pretty much going to sell whatever the hell they can (certainly corn and soybeans). Now, I do not “know” for a fact that is what they do. I know some milk producers FOR YEARS have literally dumped out their product due to oversupply. But I think common sense tells you soybean and corn farmers are going to sell as much as they can, even with depressed prices. And I think your quotes from Mr Shepardson at Pantheon support my little theory.

          it’s not that “deep” a thought. Every business needs a certain amount of “cash flows”, even when they are losing money.

          Reply
          1. pgl

            Good points. Storage involves a time value of money which is often higher than the risk-free rate for farmers who face volatility risk etc. Of course the short-term risk-free rate was near zero for a while but under Trump, this rate has been rising.

            Of course an economic illiterate like CoRev can talk about storage without a shred of understanding of the economic factors affecting whether storage makes any sense.

        2. CoRev

          Pgl, what an economist you are. I know they both start with “S”, but shipped is not sold. BTW, next time you look at a calendar note the month. Hint: It’s not May. Pgl, show us your economic and market prowess by providing the month and price these exports were actually sold.

          Reply
          1. CoRev

            Pgl, why is it when challenged you run away? I don’t remember answering even one challenge. It says a lot of your research abilities and knowledge.

          2. pgl

            “why is it when challenged you run away?”

            Your incessant babbling is not challenging. It is boring and a total waste of time.

  7. Moses Herzog

    @ Menzie
    It’s very easy to “call out” the CoRevs, the PeakIgnorances, and the “Princeton” Kopits of the world. Or also ignore them, based on knowledge base (low), ignorance (high), and an ability to twist reality to their personal belief system that Donald J Orange Excrement is always right. We sometimes just let them blather on with little notice.

    But there are “other voices” we expect better standards and dialogue from, yes??

    I know it’s considered “bad form” to criticize or call out colleagues (at least by name) in the economics profession. It’s like an MD telling one of his patients that the MD he plays golf with every week and writes patients referrals for has made a big medical blunder. We’re “just not supposed to do that”. Although why “we just don’t do these things” has never been clear to my mind. Well, you know, following (or encouraging others to follow) social norms is not my strong point. Uncle Moses just isn’t constituted that way. Do you think a Mr. John H Cochrane has some confessions to make here on his opinions and past statements on soybean prices, and if so, can a man with a GARGANTUAN ego spit out the words or type out the words “I was wrong.” ?? Or shall a Mr John H. Cochrane continue on living in an alternate universe in which Mr. John H. Cochrane’s unblemished self-image is never wrong??

    Reply
    1. pgl

      “an ability to twist reality to their personal belief system that Donald J Orange Excrement is always right.”

      This is the one talent the Usual Suspects have in spades! And when we present real world evidence that suggests otherwise, they go off on how we do not understand markets. Seriously? None of them could pass freshman economics. Sort of like Donald Luskin who dropped out of Yale his freshman year. And he writes some really stooopid things with the same old message – the right wing is always rights and liberal economists are evil.

      Reply
  8. pgl

    CoRev is trying to rebut the real world evidence on soybean prices by his usual uninformed bloviating – this time something about storage. Of course he has never read the seminal paper by Angus Deaton and Guy Laroque entitled “Competitive Storage and Commodity Price Dynamics”:

    http://discovery.ucl.ac.uk/16840/1/16840.pdf

    There has been a slew of papers following their discussion of both theory and evidence. Menzie can correct me but I have not seen any of these papers that applied this model to the issue of the Trump trade war and how it might explain soybean prices.

    As I have suggested to CoRev before – he should spell out his model, do some real research, and write up a path breaking paper for the Journal of Political Economy. I’m sure they would love it!

    Reply
    1. CoRev

      Pgl, as I have suggested read a Business primer. You’ll be a more rounded economist for it. You might then understand that selling high is just a little bit important.

      BTW, I think Figure 3 in you reference shows some of what we have been trying to tell you.

      Reply
      1. pgl

        You managed to only noticed Figure 3? Tell us old master of economics – where in this figure does it model in tariffs?

        Of course you tell us to read some business primer but cannot bother to provide a link, a title, or the author. Oh wait – I know who the author is. Dr. Seuss.

        Reply
        1. CoRev

          Pgl, model in tariffs???? The paper, your reference, admits not even modeling in harvests. Harvest information is kinda important to ag. commodities for estimating storage costs/impacts on values. It’s your reference not mine, and yet you failed to understand it. Did you even read it?

          Reply
          1. pgl

            Christ – you really are STOOOPID. I noted this article did not factor in the role of tariffs and invited you to fill in the modeling. Oh wait – you are incapable of doing so as you do not understand even the basic model. Of course I doubt you get 2 plus 2. Why do you insist on proving you are completely clueless? Everyone knows this by now.

          2. CoRev

            Pgl, Christ – you really are STOOOPID. Why are you ignoring my comment re: Figure 3? Could it be perhaps show what we have been trying to tell you all along?

            Only you insist modelling in tariffs in a storage model. Go for it! Please, but I can bet you won’t, as you have failed to respond to any previous challenge.

          3. pgl

            “Pgl, Christ – you really are STOOOPID. Why are you ignoring my comment re: Figure 3? Could it be perhaps show what we have been trying to tell you all along?”

            FYI – the topic here has and is always the impact of the tariffs NOT the dynamics of good harvests v. bad harvests. I could accuse you of changing the topic which of course is dishonest. Then again – you have to be the dumbest troll ever so whether your rants are Stupidity or Mendacity, it is hard to tell.

  9. Moses Herzog

    Dave Chappelle on PBS NewsHour. WARNING It’s slightly vulgar in some parts, not that bad.
    https://www.youtube.com/watch?v=yTv1wJ_VUgY

    I was raised as a lower middle-class white, and our parents had us listen to Cosby’s records and to us, (this would have been late ’70s very early ’80s) we listened to Cosby like we listened to a Sinatra album. Yeah one was singing and one was comedy—but to us kids, they were ICONS and as children we honestly didn’t take to much note of the skin color. We just knew that when Cosby talked about “the chicken-heart……that ate Manhattan” or go carts or getting your tonsils taken out we were bent over laughing with our foreheads touching our knees. Maybe I was a ten year old white kid, but when Cosby was talking, you almost felt he was talking about your own personal experiences–maybe for us it was watching Spielberg’s “Poltergeist” at age 9 in a cheap motel room instead of “the chickenheart that ate Manhattan’ but Cosby had decoded and verbalized those exact feelings you felt.
    https://www.youtube.com/watch?v=fE0hHEtkkQA </b.

    The comedy seems cheesy and infantile in 2018,—but, in the '70s Cosby had you right inside his hand as he took you through the story.

    Reply
  10. noneconomist

    An afternoon of perusing the comments on this blog–while sipping a nice California red blend–has produced this observation: Wisconsinites will likely be cutting more cheese in the future while Midwestern soy bean farmers are in danger of being gassed by falling soybean prices. Apologies to all.

    Reply
    1. Moses Herzog

      @ noneconomist
      See, I’m selfish, I keep hoping this means cheaper 豆腐 blocks at the grocers (although they are pretty cheap generally) and maybe some cheaper cheese, generic brand frosted corn flakes, etc. But why do I get the distinct impression that the supermarket price changes won’t be as big going down as they would be if commodity prices were raising?? Anyone want quote me odds on that wager, ‘cuz I think I would give about 50 to 1 on that.

      Reply
  11. PeakTrader

    I think, Steven Kopits was correct when he stated China will “dig in” to facilitate a trade war.

    China is an authoritarian top-down economy that doesn’t care much for its masses, is very inefficient, and creates enormous negative externalities.

    The inefficiencies and negative externalities may offset China’s real GDP growth up to 5% a year, when accounted for appropriately.

    Consequently, the economic well-being of China’s masses is less than reflected in GDP growth. China’s growth-at-any-cost policy will likely end badly, either in a whimper or a bang.

    Reply
    1. PeakTrader

      The Rand Corporation states:

      “The large costs of air pollution are driven by health impacts and loss of labor productivity, running 6.5 percent of China’s gross domestic product (GDP) each year between 2000 and 2010, and rising as China’s population becomes more urbanized and productive.”

      https://www.rand.org/content/dam/rand/pubs/research_reports/RR800/RR861/RAND_RR861.pdf

      That doesn’t include the massive contamination of soil and water, along with deforestation, erosion, and desertification. And, of course, the massive inefficiencies in the economy.

      Reply
      1. PeakTrader

        “A conservative estimate by the Carnegie Endowment for International Peace put the cost of corruption in China at about 3 percent of GDP annually…analysts have estimated that the wealthiest 10 percent of Chinese earned 65 times that of poorest 10 percent…According to a report issued by the Bank of China, 14 percent of those with a net worth of 60 million yuan, or $10 million, have already emigrated, and an additional 46 percent favorably regard relocation. Lack of confidence in the system is also suggested by money leaking out of China. Despite China’s restrictions on capital movement, as much as $3.72 trillion left the country over the past decade.”

        https://yaleglobal.yale.edu/content/china-dark-side-growth

        Reply
        1. PeakTrader

          Half of China is geographically uninhabitable. However, 40% of its lakes and rivers are “seriously” polluted. The Gobi desert is expanding, reaching Beijing. Industrialization, under communism, in the habitable eastern half of China, where well over a billion people live, has turned the country into a sewer.

          Reply
  12. Moses Herzog

    One thing I have always given the conservative media credit for is controlling the terminology and nomenclature of many debates. Has anyone noticed how many policies that at least at the beginning were called “Obamacare” or tagged with President Obama’s name if they were deemed unpopular, but we keep calling these tariffs by generic names or saying “trade issues”?? These are NOT generic “trade issues”—this has now become Republican policy—to insight tariffs on USA farmers by creating unnecessary tariffs on allies such as Japan, Germany, and Canada. Not to mention other American allies, there’s quite a laundry list. So when the suicide rate of Midwestern farmers starts to dramatically rise towards the end of 2019 and on in to 2020—let’s not forget it was Republican policy and Trump policy that created the soon to be recognized clusterF**k.

    Reply
  13. Muzzy

    Wow, some just absolutely ignorant stuff written in here from people that don’t know anything about farming or how it works. A Few things for whoever CoRev is:

    1) there are always farmers selling. Period. Farmers have to take out massive operating loans, or pay for inputs using the previous year’s sales no matter what someone is always hauling grain. Talked to a customer hauling last year’s beans in two days ago. Hauled in a few excess seed beans a couple weeks before that.

    2) elevators are always bidding, look at an elevator website. Cash bid on beans for November in Beltrami MN is 8.09, current is 7.97

    3) you can’t just store beans forever. 1, they need to be dried, if a farmer can’t afford the propane to do so, he has to wait until they dry in the field (which doesn’t always happen) or haul them in, or have a foot of sludge in the bin. They also need storage for their crop, an 80 acre field of beans will fill a 3000 bu bin, the same field of corn will easily fill a 13kbu bin. Farmers physically cannot store everything.

    4)farmers cannot hold everything for a year. Simply put, if the tariffs continue, Brazil will ramp their production, and US farmers will have to switch crops, but no matter what, they will need bin space. they also need to pay back operating and machinery loans. If you don’t pay the bank, you don’t farm next year.

    In short, nice try making this liberal v. Conservative but you don’t know what you’re talking about and you seem super fing dumb to anyone who actually knows ag. Best go back to taking rights from women and minorities in your free time.

    Reply
    1. CoRev

      Muzzy, thanks for the confirmation of what we have been saying from the beginning. When making statements of fact:
      “1) there are always farmers selling. Period….” Please give us numbers or at least trends. Do you think farmers selling trend is up????? Who said otherwise.
      2) elevators are always bidding, look at an elevator website.” Not true I even showed how many elevators are not bidding on soybeans right now. More importantly how many farmers are selling at those prices?”
      3) you can’t just store beans forever. …. and 4)farmers cannot hold everything for a year…” Who ever said otherwise?

      Nice try but you are making another strawman argument. ” A straw man is a common form of argument and is an informal fallacy based on giving the impression of refuting an opponent’s argument, while actually refuting an argument which was not advanced by that opponent.”

      Why must so many lie to try to make a point? Liberals are the worst if you read through these comments.

      Reply
  14. Ed Hanson

    Another look at the trade war with china. Nice title, “Is President Trump already winning the trade war?”

    https://www.msn.com/en-us/money/markets/is-president-trump-already-winning-the-trade-war/ar-AAzFTsT?ocid=spartanntp

    A few highlights from article.
    “The U.S. trade imbalance with China in May totaled $43.1 billion, down from the $47.2 billion posted in March; it’s the smallest monthly deficit since October 2016 and caps the largest three-month reduction in 10 years.”
    “China’s currency has weakened markedly in recent weeks”
    “Societe Generale economists estimating that the Chinese economy could lose 1 percentage point of GDP growth and upwards of four million jobs while the U.S. would suffer a modest 0.2 percentage point drag on GDP growth. ”
    “While U.S markets are taking this in stride, Chinese share prices are down 12 percent over the past month”

    A complicated issue with many ways of analysis.

    ED

    Reply
    1. pgl

      Ed?! Taking CoRev and PeakStupidity off the hook we see. Could you find possibly a more stupid discussion. Let’s see Trump is wining because U.S. consumers have to pay more for goods and we had a temporary and small increase in net exports. And Sweden beat England today!

      Reply
    2. 2slugbaits

      Ed Hanson So apparently Trump’s idea of “winning” a trade war is that the other guy comes out of it worse than you do??? The fact that the Chinese might be made worse off than Americans is cold comfort to the fact that we’ll still end up being worse of…just not as badly worse off as the Chinese.

      I also don’t understand the importance of a narrowing of the bilateral trade deficit. Who cares? And is a weaker Chinese currency something that helps US ag exports to China and reduces US imports from China???

      I don’t think this is a complicated issue at all. It’s a no brainer. Trade wars are stupid.

      Reply
      1. CoRev

        2slugs, ” Trade wars are stupid.” Which one? The current attempt to change/stop China’s decades long war against us? Or the one where we let China continue its war without interruption?

        Sometimes you guys lack of historical perspective amazes.

        Reply
        1. pgl

          Ah yes – the US has never had protectionism. After all Lincoln was a free trader.

          Hey CoRev – I guess you flunked American history too.

          Reply
        2. 2slugbaits

          CoRev You mean the war in which China subsidizes its exports giving us more stuff at lower cost? That war? But you believe in the motto of cutting off your nose to spite your face. Why do you think countries engage in trade? Why do you think like a mercantilist?

          Reply
          1. CoRev

            2slugs, how soon you forget the discussion on predatory pricing/loss leader strategies in order to take over a market. You’re approaching pgl territory.

          2. pgl

            “2slugs, how soon you forget the discussion on predatory pricing/loss leader strategies in order to take over a market.”

            2slugs? You don’t remember this? It seems PeakDishonesty never provided a shred of evidence for this claim. But CoRev came to the rescue – well sort of it. CoRev proved one thing – he has NO CLUE what predatory pricing even is but he could invent new terms which of course he had no clue what they meant. AND he claimed predatory pricing is a good thing which undermines the BS from PeakDishonesty.

            Yes our right wing trolls are incredibly funny the way they shoot themselves in the foot faster than those stupid Trump tweet.

        3. Ed Hanson

          CoRev,

          not only a historical perspective but a future perspective also. As for the present, If the current state of affairs is one that President Trump is seeking to change, then the likes of slug want every thing to remain the same. Such attitude is not based on economic thinking but politics. So, pointing out how shallow the arguments are, is either fruitless because the likes of slug already know that but is playing the political game or the emotions of politics are so great that understanding the weakness of position is not possible.

          Ed

          Reply
      2. Ed Hanson

        Slug

        Are trade wars more stupid than the status quo?

        President Trump was elected and one of the pillars of his campaign promises was to do something bout how unfair the US was being treated by the world in trade deals. He identified China both as of thief of IP and as having tariffs on American goods higher than the US had on Chinese goods. All China had to do was except a more fair trade deal, but instead chose to hurt its own economy. It was not Presidents Trumps choice that China decided on a poor course.

        You insist on looking only for the short term while President Trump is properly looking long term. No one, not former administrations, nor certainly not foreign nations looked to correct the unfairness of tariffs. So perhaps you can try to see the long term advantage if fairer and freer trade deals an be made in the interest of the US.

        My answer is yes, the status quo is stupid and a trade war is preferable. Nothing else would change the nature of world tariffs which are detrimental to the US. In the long term the small current pain will be worth the final result.

        Ed

        PS. To answer your statement, trade deficits in a free trade environment, who cares, but a trade deficit caused by unequal tariffs which penalize US goods, is greatly cared about by a majority of Americans.

        Reply
        1. 2slugbaits

          Ed Hanson The IP issues with China were legitimate concerns. A tariff on Chinese imports doesn’t fix that problem.

          I don’t care whether China’s subsidies and tariffs hurt the Chinese or not. Basically it’s not my problem. But I care a lot when Trump throws up tariffs because that makes things more expensive for me. Now we would certainly be better off if China didn’t have any tariffs or trade barriers; but retaliating with tariffs of our own only makes us worse off. Then again, the world would be better off if the US didn’t have tariffs and trade barriers and subsidies as well, but I don’t see Trump offering to give those up. The reason we have trade with other countries is not to provide export markets for American firms. Exports are a necessary evil that we have to live with if we want to enjoy imports and more of everything.

          the status quo is stupid and a trade war is preferable.

          The status quo was in effect for a very long time. All factors of production and supply chains adjusted to that status quo ages ago. There’s an old saying that the best tax is an old established tax because all factors of production have adjusted. Same with tariffs. What Trump did was upset the status quo, and that will take a long time to reset. In the meantime, we’ll all be poorer for it. And Trump is likely to find out that starting a trade war is a helluva a lot easier than stopping one. Voters and politicians won’t easily give up tariffs, subsidies and trade barriers once they get locked in. Trade barriers create their own strong political lobby. Once a trade barrier goes up, it’s very difficult to take down.

          a trade deficit caused by unequal tariffs which penalize US goods, is greatly cared about by a majority of Americans.

          A sad commentary on the economic literacy of the American voter.

          Reply
          1. CoRev

            2slugs here are some pull quotes to show the weakness of your thinking.
            1) ” The reason we have trade with other countries is not to provide export markets for American firms.” Really!? If expanding markets for American firms is not the reason those firms export, then what is a better reason?
            2) “What Trump did was upset the status quo, and that will take a long time to reset.” And the fear is that he will AGAIN be successful with another promise!
            Your comment is a sad commentary on liberal literacy of economic policy, and worse the need to keep that liberal core voters ‘ emotions high in the short term before the mid-terms. What will be the next genned up issue? We still have months to go before the mid-terms, and this one will probably not age well.

          2. 2slugbaits

            CoRev If expanding markets for American firms is not the reason those firms export, then what is a better reason?

            You’re confusing the national economic interest as to why we trade with the personal motivations of those who do trade. You’re expressing the old mercantilist view of trade. Seriously, buy and read an econ textbook.

            the fear is that he will AGAIN be successful with another promise!

            The fear is that he WILL keep his 30 year promise to end free trade. Long before Trump became President he was one of the loudest critics of free trade you’d ever hope to find. His understanding of economics comes from the cramped view of a NYC real estate tycoon that believes in a zero sum game. You and Trump are both stuck in the 18th century. Economists have been fighting mercantilist trade views for the last 200+ years.

          3. Menzie Chinn Post author

            Bruce Hall: As far as I can tell, the Coalition for Prosperous America has not seen a protectionist measure it didn’t like…and I’ve been bombarded by emails from them for years.

  15. pgl

    OK – now that we see CoRev is totally incapable of articulating why his storage idea refutes what Menzie has been saying. Surprise – CoRev has no clue WTF he is babbling about.

    The basic idea, however, is simple. If US soybean farmers expect their prices to be say $12 bushel next year, they might have some incentive to incur the cost of storage. Of course such a forecast would be seen by most people as unrealistic and farmers are not nearly as stupid as CoRev. Yes we are seeing low soybean prices from the Chinese tariff. Now if the market thought that this trade war would end quickly and in fact China would open its market to even more US soybeans, then we would see the predicted effects which are: (a) less soybean sales as farmers stored their beans; and (b) very little reduction in the US price.

    But wait – look at what is happening in the real world. Clearly CoRev has not. We have been selling more soybeans at a very depressed price. How could this be? Oh yea – farmers are not as stupid and CoRev and PeakStupidity and they see this trade war continuing at their expense.

    How do we know this? Look at what is happening in the market. Of course CoRev and PeakStupidity pull the covers over their own eyes and live in a fantasy world where every lie King Donald utters in their view is reality.

    Reply
    1. CoRev

      Pgl, sigh! Now your making up hypothetical (lies) to support your position(s). Tell us old wise one how many actual soybeans have been sold at which price in this period.

      BTW, when were they harvested and how were they kept until they actually shipped? That answer is STORED! Now get us the price, even an average for them. You seem to believe it so simple to find.

      Since this is another challenge, I remind everyone to watch your next actions/answers. I’ll bet they will not relate.

      Reply
      1. pgl

        I was trying to articulate whatever the hell you have been babbling about. Of course you are such an incredible idiot – you had no clue I was trying to help you out here,

        Reply
        1. Anonymous

          Pgl, let me repeat: “Since this is another challenge, I remind everyone to watch your next actions/answers. I’ll bet they will not relate.” And there you were running away as fast as you possibly could. That was your hypothetical and you claimed that it was easy to see soybean volumes (not soybean futures contracts) just by looking at the data, pshaw!

          You can’t even provide the answers for your hypothetical.

          Reply
  16. 2slugbaits

    CoRev You’ve written so much nonsense that it’s just easier to collect some of them into one response.

    in international markets at near Supply/Demand equilibrium, the new Chinese demand will cause other users to fill demand from other major suppliers.

    That’s fine for the Chinese and their new sources of supply, but it doesn’t help American farmers.

    2slugs, but, but but you said Iowa farmers were a single crop farmer, and implied that crop was soybeans.

    No, I said that farmers were constrained in their ability to shift between corn and soybeans. Relatively small farms tend to focus on one crop for economy of scale reasons.

    thanks for the confirmation of what I said from the beginning about how farmers mitigate risk.

    What you said was that farmers chose to concentrate on different crops from year to year based on expected market conditions. That’s not the same as mitigating risk. Mitigating risk means that you adjust current year output allocations based on covariances across crops.

    Don’t forget crop insurance.

    Crop insurance is another cost. Don’t forget to include it as another bill that has to be paid.

    Your biggest problem is that you don’t understand the extent to which farmers are price takers, not price setters. Not every farmer is a “gentleman farmer” who just grows stuff as a hobby. When prices are low farmers don’t want to sell, but some of them don’t have a choice. That’s what happens when you’re highly leveraged. They have bills to pay and they have to liquidate stock even if it means selling some of it at distress prices. And buyers don’t want to overpay either, so if they see bleak demand they aren’t going to offer a good price. The equilibrium price is the price that clears at the margin. You seem to be confusing it with the reservation price, which is the price that would induce non-marginal farmers to sell. Storage is one option if you can afford to wait for the market to pick up, but there is no guarantee that it will pick up. The best forecast of the future price is the futures market. All the while the farmer is waiting to outsmart the market he is incurring storage and holding costs. If the price goes up a bit, then a farmer will want to pull grain out of storage; but so will every other farmer, which will drive down the price again. Bins also cost money to build. And the quality and value of soybeans deteriorates with time, so the longer you hold beans in storage the less value they will have when you do sell them.

    I’m not sure what you consider a good business primer. Dale Carnegie’s biz school with pearls of wisdom like “buy low, sell high”?

    Reply
    1. CoRev

      2slugs, there you’ve gone and done it again with another gibberish comment.
      “That’s fine for the Chinese and their new sources of supply, but it doesn’t help American farmers. ”
      Remember equilibrium? Who fills the supply when China shifts sources and others’ demand are not met because of China’s shift?

      “No, I said that farmers were constrained in their ability to shift between corn and soybeans. Relatively small farms tend to focus on one crop for economy of scale reasons.” Two problems with this: 1) you have never said this. 2) you are just wrong. Before planting farmers are not constrained in their ability to shift crops. Small farmers are the least constrained in their planting decisions.

      ” Mitigating risk means that you adjust current year output allocations based on covariances across crops.”
      Which is it? “Relatively small farms tend to focus on one crop…” or they tend to store all or part of their harvest for better off season prices. Remember the core of this discussion has been storing??? Pgl, seem enamored of its importance.

      You final paragraph is a mix of gibberish, and duh its so obvious.
      “Your biggest problem is that you don’t understand the extent to which farmers are price takers, not price setters.” What the heck does this have to do with anything said these many weeks? Of course some farmers will have to sell at inconvenient times and most will not. Duh! Then some pricing and selling gibberish again of no relevance.

      Since you believe that futures are the best estimator, go on the record with a Winter price. Pick your own month. You can even caveat it with and without tariffs. Precision is not necessary, since none of us have actually given a $ price yet. Lower than or higher than (pick your baseline) is fine.

      Reply
      1. 2slugbaits

        CoRev Remember equilibrium?

        The effect of a tariff is to shift the equilibrium point to the northwest.

        Who fills the supply when China shifts sources and others’ demand are not met because of China’s shift?

        No doubt that some US supplies will shift away from China and to other consumers; but the shift will not be immediate and it won’t be costless, so in the end there will be less demand for American soybeans.

        1) you have never said this.

        Yes, I did say that farmers were constrained in their corn/soybean decisions. You thought it was obvious. Remember?

        Before planting farmers are not constrained in their ability to shift crops.

        Yes they are. They are constrained by the crops they planted over the last 2 or 3 years. That’s a big constraint for a lot of farmers. Again, I made that point before and you said it was obvious.

        Small farmers are the least constrained in their planting decisions.

        I have no idea whether this is true or not, but it doesn’t have anything to do with what I said. Reread it. I said that small farmers tended to concentrate on planting a single crop because of economies of scale. They are less likely to plant multiple grain crops in a single year.

        or they tend to store all or part of their harvest for better off season prices.

        No farm stores all of its harvest for better off season prices. That’s insane.

        ” Mitigating risk means that you adjust current year output allocations based on covariances across crops.”

        You can’t do math, so I’m pretty sure you have no idea what I said. I guess that’s my fault.

        What the heck does this have to do with anything said these many weeks?

        It means you don’t get to hold onto stock until you get the price you want. When a farmer has to liquidate inventories that farmer must take the current price. A farmer’s ability to withhold inventory from immediate sale is limited by that farmer’s ability to suffer losses.

        Of course some farmers will have to sell at inconvenient times and most will not. Duh!

        Good. Now you agree that some farmers will have to sell at very low prices. That’s progress.

        go on the record with a Winter price. Pick your own month.

        Nov: $8.95/bushel

        Your turn.

        Reply
        1. Ed Hanson

          my apologies CoRev for cherry picking a slug statement but it was to juicy to ignore. slug wrote in part; “No doubt that some US supplies will shift away from China and to other consumers; but the shift will not be immediate and it won’t be costless, so in the end there will be less demand for American soybeans.” Since farmers can not shift immediately than there is no worry about Brazil sales to China. After all shifts can’t be made immediately, so every thing we here about Brazilian-Chinese soybean trade must not be true.

          As for demand for US soybeans, it is still an unknown if demand will be reduced. Reducing food consumables is difficult. It used to be possible because populations were subject to starvation, but the countries we are discussing are all rich enough that before starvation a higher price will be tolerated and paid. So it becomes a substitution equation. What food products will be substituted for soybean consumption and where will these substitutes be found. It is a wait to see how it turns out, but anyone who does should become instantly rich as the market is ripe to be exploited.

          Ed

          Reply
          1. pgl

            “As for demand for US soybeans, it is still an unknown if demand will be reduced.”

            Someone has not been falling what is happening in the real world. While the global price of soybeans is still over $10/bushel, see Menzie’s chart on low the US price has gone.

            Oh wait – you get your economics from Fox and Friends. Never mind.

          2. CoRev

            Ed, they’ve shown so many times they do not understand the actual market. Where will demand shift if/when China acts on its tariff threats???? Only liberals seem to know, eh?

          3. 2slugbaits

            Ed Hanson

            First, China started looking elsewhere for soybeans at least a year ago. They were at least a step ahead of Trump. Second, American farmers will find it costly to seek new markets. For example, the Baltic Dry Index is as high as it’s been in almost 5 years, so there isn’t a lot of excess shipping available. And selling it to other customers means you’ve got to accept some unfamiliar currency risks. Sure, farmers and brokers will be able to unload some of their beans, but if you think they will be able to do this on the cheap and without any economic pain, then I’ve got a bridge to sell you. Finally, one wild card in all this is the size of the US soybean harvest. The corn supplies look great, but if you’ve seen the Iowa/Illinois soybean fields you’ll know that they are very “dirty” because extreme rain prevented spraying for weeds at the time when spraying would have been helpful. So you see lots of weeds and an exceptional amount of volunteer corn. Hard to tell which way that will cut.

          4. CoRev

            Pgl, strike out DRAMATICALLY again, and he claims he’s an economist
            ““As for demand for US soybeans, it is still an unknown if demand will be reduced.”

            Someone has not been falling what is happening in the real world. While the global price of soybeans is still over $10/bushel, see Menzie’s chart on low the US price has gone.”

            Being such a famous and well trained/educated economist, what would you expect to happen to US soybean demand with the price differential you just pointed out????? Don’t run away now, this is a simple question.

            If you want extra credit, tell us where and how many US soybeans are/will be sold at the current price? You did claim it was in the data if we just looked.

            I’ll just wait on the sideline for your esteemed and erudite answer(s).

          5. CoRev

            Pgl, your ignorance is frightening. One comment you show US soybean exports went up –dramatically even at a lower price for farmers (you think without any evidence of actual price at sale), And then you make ass-umptions of demand at this lower price being lower.

            That’s the logic from (in his own mind) a renowned economist. All fluff and no stuff!

  17. noneconomist

    Great headline–and accompanying article–in today’s Sacramento Bee: “State’s dairy farmers stand to get creamed by global trade war”
    Seems many dairy farmers who voted for Trump ” are now stinging from the trade war he’s launched, particularly those in California’s Central Valley, who have built their livelihoods on exports to MEXICO and CHINA and other markets.”
    And this tidbit: “Although Wisconsin is known as the cheese state, California is the nation’s No. 1 dairy producer, turning out 39 billion pounds of milk in 2017, California accounts for one third of the dairy products exported, much of it being cheese and milk powder, which are highly sought by MEXICO and CHINA.”
    Not to worry, however, three Republican congressman who represent the valley have spoken out about the tariffs. Among them is, yes, Devin Nunes who, when not licking Trump’s shoes, represents constituents who will be harmed the most.
    And, those radical leftists at the Chamber of Commerce expect serious California economic losses on many trade fronts, including $700 billion in exports to Mexico and over $4 billion on exports to China.
    One astute Tulare dairy farmer noted: he thinks Mexico and China have purposely targeted the valley. “They know that the San Joaquin Valley is red, and that Wisconsin helped elect Trump. They have figured out how to apply pressure.” That’s a “Duh!” Fer shure!
    When the ball finally rests in the dimwit Nunes’ court, what will he even do with it? Or how long will it take him to figure out it’s there?

    Reply
    1. Ed Hanson

      nonec

      did you even bother to read the article linked by me? It concentrated the damage to China caused by its leaders decision to increase tariff rather than the ethical choice to protect IP and to reduce tariffs barriers it created against US imports. I suspect similar articles will be written about other countries as their leaders also choose to retaliate rather than change the tariffs designed to reduce US imports. To reduced the damage foreign leaders are doing to their citizens an economies, they will sooner or later become better free traders with the US. It is turning out to be true, this trade war is easy to win, just not painless and not instantly.

      Ed

      Reply
      1. 2slugbaits

        Ed Hanson You sound surprised and shocked that leaders of other countries would pursue self-destructive trade policies. But note that American politicians are no more immune from this kind of stupidity than foreign leaders. If you think Trump’s trade war is a matter of national pride and the will of the majority, then why are you surprised when citizens of other countries feel exactly the same way? Understanding international trade is not intuitive and people tend to demand that SOMETHING MUST BE DONE even when the most rational policy is the “do nothing” policy. But I guess that doesn’t sound manly enough. Look in the mirror. You’re supporting the same self-destructive trade policies that people from other countries support behind their leaders. And if you think that trade wars are easy to win, then you’re ignoring centuries of trade history. The era of trade liberalization under GATT and the WTO represents both a high water mark and an exception to the history of global trade.

        Reply
      2. noneconomist

        OK, you lib tariff crybabies. Ed Hanson has put you on notice. That’s you, Chamber of Commerce, California Farm Bureau I(and most county farm bureaus in the state), Heritage Foundation, Koch brothers (Vladimir and Nicolai?), Americans for Prosperity, Farmers for Free Trade, numerous Dairy Councils, the whole bunch of you unpatriotic business haters. and you can add the corporate commies at GM, Toyota, U.S. Steel and a bunch more to that list.
        See, Ed is very concerned about what China is doing to its own citizens by continuing unfair trade policies. He wants to “reduce the damage foreign leaders are doing to their citizens an economies”. Hence, a trade war that everybody knows is “easy to win but not painless and not instantly.”
        So, to protect the rights of these aggrieved citizens in China–and other downtrodden countries– Ed doesn’t mind some pain inflicted on citizens here. Sure, there may be a few thousand (or more) jobs lost and a few billions(or more) lost to companies doing business overseas including many small businesses, especially those in western states.
        After all, increased joblessness and lowered profits here are small prices to pay to force those dastardly evildoer governments elsewhere to become “better free traders” and to treat their citizens with dignity and respect. Let them eat their own cake and less cheese.
        So buck up, you whimpering dairy farmers and almond growers (and grape growers, and pistachio growers and………). Let’s show these totalitarians what freedom looks like.
        Gimme a T, gimme an R, gimme a U, gimme an M, gimme aP! What’s it spell? Victory!

        Reply
        1. Ed Hanson

          nonec

          Then pain being inflicted on the Chinese people is mostly from the ill thought out reaction of its leaders. The choice of retaliation tariffs instead of a sensible policy to protect IP rights and to reduce tariffs on American goods was stupid. The more sensible policy would have quickly ended the threat and use of US tariffs on Chinese products, and lead to additional negotiations to reduce the trade deficit. And the pain on the Chinese people would not have occurred.

          Europe is going the same direction and will find that it too will suffer big economic losses. I do not understand why with all the accusations that President Trump is acting to protect segments (ex. Steel and Aluminum) of USA economy with tariffs, none seem to acknowledge that the Europeans have been doing so for decades, and US policy has allowed this to its own detriment. President Trump is attempting to correct this.

          The political forces in Europe which benefit from the tariff protection are strong. This is the reason that European leaders chose the stupid path of tariff retaliation instead of the simpler and better reduction of tariffs. The outcome will eventually be equalization of tariffs between Europe. It is a shame that the EU leaders chose the painful; way of getting there.

          Ed

          Reply
          1. CoRev

            Ed, you can add Canada to the list also. When they realize a 25% tariff on their AMERICAN cars, and as the AMERICAN companies close or threaten to close their Canadian production facilities, then it will dawn on Canadian auto workers who is responsible. The new president of Mexico seems to see the forest for the trees for his auto industry. Strangely, Merkel also seems willing to negotiate lower tariffs. A not too united front seems obvious.

            All of this to protect their unfair trade advantages established over time even with and perhaps because of previous free trade agreements. Elitist envy and greed at its worst. Amazingly liberals believe it is unfair for the US to want to better level the trade practices. Some times liberal logic is confounding.

        2. noneconomist

          Yes, CR. All that liberal logic emanating from the U.S. Chamber of Commerce, the Kochs, multiple farm bureaus in multiple states, Heritage Foundation, numerous Republicans in the House and Senate, et. al.
          Radicals like Sasse, Alexander, and Hatch. Even the dimwit Nunes has actually pipped and squeaked about the tariff dangers to his district, which is one of the top dairy areas in the country.
          But thanks for the info. I never knew how anti-business the C of C could be.

          Reply
          1. noneconomist

            Elitist envy and greed at its worst. More crazy liberals: the Heritage Foundation! That’s you, Ed Meese.
            You’re a riot, CoRev, a regular riot!

          2. baffling

            corev has simply changed his blind allegiance from republicans to trump. he as a new ideology to support now. corev is one of those critters who would carry trump on his shoulders after he shot somebody in the middle of 5th avenue. pathetic and mindless.

  18. Moses Herzog

    @ noneconomist
    Almonds:
    https://www.sacbee.com/latest-news/article214459579.html

    “In June, the EU started imposing retaliatory tariffs on more than $3 billion in U.S. products, including the Harley-Davidson cycles and major California crops such as rice. In April, China began hitting back with its own tariffs on $3 billion of U.S. goods, including California farm products such as fruit, nuts and wine.

    But it could get much worse starting July 6 if China – California’s top export market for pistachios and second for almonds – follows through on $50 billion in additional tariffs it announced in reaction to U.S. duties on Chinese goods. Trump, in turn, ordered the drafting of $200 billion more in U.S. tariffs.

    For almond growers, a 10 percent tariff in China that rose to 25 percent in April could jump to 50 percent in July if there’s no agreement. China is a $500 million annual market for California almonds, but with all the uncertainty, contracts for future shipments are already down, Waycott told the Sacramento Bee’s editorial board. While global demand for almonds is strong, being cut off from China will hurt.”

    The article also states that almonds are California’s most lucrative crop.

    A lot of people on this blog are obsessing over China (I confess I probably have committed the same “sin”). I still have’t stopped and tabulated (Menzie gave us that table awhile back) if the EU, Japanese, Mexico, Canadian, and etc tariffs add up to equal or more than China?? if you created a ratio with a denominator of 10, what would each nation’s number be of that 10 (where 10 scaled out to the total number of tariffs imposed on American products as a factor of lost sales multiplied by the tariff) what would that number be for each country?? I think that would be a fascinating number to see if anyone knew how to mathematically crank that one out. It wouldn’t be “exact” but some good educated guesses could be made for each nation’s fraction of that 10 denominator.

    Reply
    1. pgl

      In 2000 China was admitted to the WTO. By the end of 2018 – the US will be kicked out of the WTO. Who’s winning? Make America Poor Again!

      Reply
    2. noneconomist

      Most lucrative, Moses, if you don’t count marijuana.
      Of course, most marijuana is consumed domestically, to the tune of an estimated near $4Billion this year and perhaps $5Billion in 2019. Outdoor harvest season is less than two months away.( Not unusual in the fall to see license plates–and trailers–from all over the country waiting to fill up). For those who’ve never experienced that, think the odor of young skunk wafting on the air depending on wind current.
      That’s one reason I’ve become a big supporter of indoor growing.

      Reply
  19. Moses Herzog

    These are dated numbers in the sense there are more coming, but using the former table Menzie gave from Amy Cheng and her Foreign Policy publication pals:

    Non-China tariffs= 12.5 billion+3 billion+3.4 billion+1.8 billion +0.4 billion+ 0.24 billion +Russia ???= 21.34 billion

    China tariffs= 84 billion

    Total=105 billion (this 105 billion would kind of be my “10 denominator” I was referring to earlier, to figure a numerator for each country’s part of Trump’s self-inficted tariff losses. the 105 would be equated to 10 then figure the other numerators from that). I’m expressing this very poorly but I think you get the idea.

    21.34 divided by 105= 20.32% Non-chinese tariffs. So, anyone is welcome to correct my math or update those numbers. But it basically means 1 of every 5 dollars lost is NOT Chinese—-all of those with the exception of Russia and “gray area” Turkey are ALLIES of America. Or at least were until Republicans and Donald J Orange Excrement decided they wanted to ruin that.

    Reply
  20. PeakTrader

    I think, these are the most interesting parts of Ed’s article:

    “There are reports that American imports into China are being slow-walked through customs. Moreover, China’s currency has weakened markedly in recent weeks in a possible bid to offset U.S. tariffs — a strategy Trump frequently called out as “currency manipulation” on the campaign trail…the European Union flatly rejected a proposal by Beijing to form a strategic alliance to take on the U.S. on trade.”

    It seems, China does not want give up any of its substantial unfair trading advantages, which harms other countries and the global economy, and is finding ways to “dig in” for the long haul. Also, China has said it “won’t give up one inch” of the South China Sea, which it claims almost all of it.

    “China claims a big backyard:”

    http://www.southchinasea.org/files/2014/09/China-claims-a-big-backyard.png

    Reply
    1. 2slugbaits

      But hey, Ed Hanson assures us that China and the EU will eventually see the error of their ways and unconditionally surrender in the trade war. Trade wars are easy to win! All hail Donald Trump, the 30 year champion of free trade! Sure. You bet.

      Reply
      1. pgl

        Forgive Ed as he was trying to back up Peaky’s incessant BS. And now Peaky puts a knife in Ed’s back.

        Reply
    2. PeakTrader

      An ambassador once said our enemies play chess and the U.S. plays football.

      And, the U.S. has been the winner, tackling problems.

      Reply
      1. pgl

        Playing football leads to brain disease. I guess you have explained Trump’s extreme stupidity. Give that man a medical degree!

        Reply
        1. PeakTrader

          Trump tackled leftists so bad, they may never recover, but they already had “brain disease.”

          Obama failed to tackle problems, e.g. ISIS, Crimea, South China Sea, etc. and the other side scored.

          I’m sure, you believe that was really smart.

          Trump isn’t afraid to tackle problems, even if he gets penalized.

          Reply
          1. pgl

            “Trump tackled leftists so bad, they may never recover”

            Clearly you never played American football. If Trump tried to tackle me, I’d just run around the fat arse. And given his athletic abilities – he would fall down with a hurt knee and whine like Neymar.

            Hey Peaky – do not do sport analogies as we all know you suck at every sport you have ever even watched.

    3. pgl

      “China does not want give up any of its substantial unfair trading advantages,”

      Wait – you have been hammering over and over that this trade war would end soon in a rush of free trade. Of course the real world contradicts each and every one of your claims so you have to flip flop like a pancake chef!

      Reply
      1. PeakTrader

        Pgl, your lack of comprehension what people say, along with your poor understanding of even basic economics, is not my problem.

        Reply
        1. pgl

          Do you and CoRev get paid by the word? That would explain the incessant incoherent gibberish we get from you.

          Reply
          1. CoRev

            Pgl, its mostly in response to the liberal nonsense we keep seeing. For instance your above comment.

  21. Benlu

    @peak

    “The 1943 Cairo Declaration and 1945 Potsdam Declaration clearly state that Japan had to return to China all Chinese territory taken by Japan, Wang said.

    “This includes the Nansha Islands,” he added, using China’s name for the Spratly Islands.

    “In 1946, the then-Chinese government with help from the United States openly and in accordance with the law took back the Nansha Islands and reefs that Japan had occupied, and resumed exercising sovereignty,” Wang said.”

    https://www.independent.co.uk/news/world/asia/china-warn-us-history-south-china-sea-second-world-war-terrritory-dispute-wang-yi-australia-a7569271.html

    Reply
  22. Julian Silk

    Dear Menzie and others,

    This is just a generic question, addressed to whoever will answer it respectfully and politely. There is no debate soybean prices will fluctuate, whether because of substitution between suppliers by those purchasing, or sellers choosing different markets, or storage decisions, etc. Yet a 25% deviation (and reversal) between prices received by Brazil and the U.S. for soybeans seems unusual, and evidence of the effect of the tariff. To those who believe the tariff is basically a blip, do you have cases where prices for soybeans deviated like this over only one month in the past, without any changes in economic policy? If so, then you have evidence for randomness in this case. If not, the effect seems to be due to the tariff.

    Julian

    Reply
    1. Menzie Chinn Post author

      Julian Silk: I think had it occurred in the past, most market observers would’ve noted the previous episodes. This suggests to me the tariff is the cause (plus all the market observers are concluding tariffs are the cause). But it could’ve just been a random occurence caused by the aliens manipulating the soybean market.

      Reply
    2. CoRev

      Julian & Menzie, no one has denied the impact of tariffs on FUTURES prices. Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices.

      As for evidence of past price dips, Menzie and I discussed an earlier 2014 33% dip during the pre-harvest period in which we disagreed on the cause. Menzie claimed it was due to a rising dollar evaluation (policy), and I related the start of the dip to to the WASDE Report. Both probably had an effect.

      Sharp rises are also reasonably common, March to May 2016 saw a modest ~16% price rise. you can do your own documents search to try to determine why for these periods. This site provides historical price data http://www.macrotrends.net/2531/soybean-prices-historical-chart-data

      Reply
      1. CoRev

        Julian, it is silliness like this: “But it could’ve just been a random occurence caused by the aliens manipulating the soybean market.” that has caused much of the reaciton in comments. I will repeat no one has denied the impact of tariffs on FUTURES prices.

        Of course Trump haters can not help themselves with an altogether level of silliness. Much has been pointed out as just plain lying.

        Reply
        1. Menzie Chinn Post author

          CoRev: Well, take a stand — how much? Majority, 1%, etc. Given a lot of price movement pre, post WASDE, at all horizons, I’m going to guess a minority is planting/weather forecast-driven.

          Reply
          1. baffling

            menzie, corev needs to take a stand on price AND timing. if those negotiations go on for a year, three years, etc? is that considered a “blip” or a negative price movement of the market? corev would argue for a 5 year “blip” if given the opportunity to cover his a$$.

          2. CoRev

            Menzie, if you want an estimate, I would say most of the price drop has been from market uncertainty due to the tariff talk and implementations. The WASDE caused a short term < week small drop in prices, but they continued to drop due to the tariff scare.
            Accordingly I will repeat the pertinent portion of my response to Julian: "…, no one has denied the impact of tariffs on FUTURES prices.” If you want a more definitive estimate of tariff impacts, I would estimate them to be in the 75% to 90%

            The blip is explained by this: “Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end.” If Friday’s price jump is an indicator, it won’t take much good news to cause a directional change. Sometimes late this Summer/early Fall farmers will be forced to move their soybeans to make room for the new harvest. If prices remain this low, that may break marginal soybean reliant farms.

            Are you sticking with your $8.85 estimate?

        1. CoRev

          OK. So??? Do you think it will not end with the resolution of tariff negotiations? Just to be clear I think they may very well end before the mid-term elections.

          Reply
          1. pgl

            You keep assuming this trade war is temporary. Of course your own storage model would lead to the conclusion that soybean prices should be well over $9 a bushel under your own assumption.

            But of course if you stopped your incessant and incoherent bitching and simply looked at the market price – you might realize that the market is signaling a very different assumption about the duration of this trade war.

            This is how almost all economists do things – marking their assumptions to the market. But of course we all realize by now you neither know anything about economics nor care to learn. So bitch on my man!

          2. baffling

            do you think the chinese and europeans will give trump what he wants, an end to a trade war prior to elections? neither region is interested in helping to promote trump policies into the future. my guess is there will not be much de-escalation until after the midterm elections. hope i am wrong, since the longer it occurs the more damage will occur. but overseas, many folks probably think there will be less damage the weaker trump is made longer term-hence the may be reluctant to help him prior to the midterm.

          3. CoRev

            Pgl, temporary trade war? Trade Is war but by another means. How naive you are! Are you so young to forget the 1973 oil embargo? And that was just one obvious example many since. When do you think this trade war started and will end?

            Baffled, “do you think…an end to a trade war prior to elections?” No to end of trade war, but yes to end of negotiations. Trade is war by another means, and we have been fighting it forever. If you do believe otherwise you are extraordinarily naive. You do remember what happened with the implementation of the Stamp Act? Sometimes trade wars end up in shooting.

      2. pgl

        “no one has denied the impact of tariffs on FUTURES prices.”

        Seriously? So there is some other fellow using your name. Yea – that CoRev is a “no one”.

        Reply
        1. CoRev

          Pgl, lying again! Show us where we denied the impact of tariff. Even in my earliest responses it was listed as one of the causes for price increases.

          I don’t intend to wait for a response, because you have yet to actually respond to a challenge. All fluff and no stuff.

          Reply
          1. baffling

            “Even in my earliest responses it was listed as one of the causes for price increases.”
            actually corev, the problem is you do not want to take ownership of your comment. you are listing this as “one” of the causes. in reality, what others on this post are arguing, and you are implicitly accepting with reluctance, is it is the “main” cause. you continue to want to deny this aspect because it throws your defense of trumps policies into disarray, so you try to hide this conclusion in semantics of “one” rather than “main” cause, so you can continue your defense of trump. this is why menzie called you out earlier to take a stand, rather than hedging your response.

          2. Menzie Chinn Post author

            From your June 15 comment, which seems to deny tariffs as the main cause of the decline:

            Menzie, as a scientist you are failing. You have shown a clear bias as Trumps Tariff threats and implementations as the MAJOR cause and a tendency to select only data and periods for it that support that bias. A longer look at the data shows USDA harvest projections have a higher and quicker price impact than trade barrier impacts. Don’t get me wrong trade barriers do impact pricing in the long run, but quick drop like this in recent history are influenced more often by harvest projections. Steep price drops occurred in 2013 and again in 2015 after USDA projected increased harvests.

            So what was the June 12 2018 USDA harvest projection: ” Price forecasts for 2018/19 are unchanged this month. The 2018/19 season-average price for soybeans is forecast at $8.75 to $11.25 per bushel; soybean meal and oil prices are projected at $330 to $370 per short ton and 29.5 to 33.5 cents per pound, respectively….
            A higher trend yield for the 2018/19 Brazil soybean crop reflects harvest and yield results for the 2017/18 crop, which is increased 2 million tons to 119 million.With higher production, soybean exports for Brazil are revised up for both the 2017/18 and 2018/19 marketing years.” The buyers driving these price fluctuations obviously follow these data closely. The USDA projections: http://www.usda.gov/oce/commodity/wasde/latest.pdf

            As i pointed out in the previous article, US predictions of planting and emergence success was that both increased by this time last year. That bodes well for US harvest yield with the obvious and constant caveat if the weather holds.

            Menzie, you are letting your bias drive your research and not keeping an open mind to other causes. And, its getting worse!

          3. CoRev

            Menzie, why didn’t you go to the earliest comments? I can understand why you saved this one, but my earlier comment have been consistent regarding Ag outputs.
            For example:

            CoRev
            February 1, 2018 at 9:33 am

            2slugs, you purely speculating on what might happen to farm land prices. This article was targeted on Grain prices. That’s why I asked for your point relative farm (output) prices. I used output to be more inclusive than just grain.

            Pgl, why all the snark? You said: “High interest rates do lower the values of property for a given cash flow. And the dollar appreciation lowered relative farm prices which would negatively impact cash flows.”, but actually meant:” High interest rates may lower the values of property for a given cash flow. And the dollar appreciation can lower relative farm (output) prices which would negatively impact cash flows.” There fixed it for you.

            Weather is the primary mover of farm output prices. Weather directly effects yield, note 2slugs reference to 15.5M tons wheat harvest drop in the US, while later crops, particularly corn had record yields.”

          4. CoRev

            I don’t believe this is the 1st of my comments acknowledging tariffs as a cause:

            CoRev
            June 25, 2018 at 11:48 am

            MenzieQuestion: Are we winning yet? Who knows who and how much impacted. Can you answer that question re: soybeans?

            BTW, no one has questioned that the negotiations and the threats and implementations of tariffs has not affected prices. Why are you beating this to death? If you believe its all about the tariffs go tell that to Argentinian farmers. Remember with soybeans we are talking about a semi-storable, fungible international commodity.”

            This comment also accepted Tariffs:
            ” As a reminder, we have been saying soybean prices, especially annually, are affected by production amounts (harvest yields) and weather also affecting yields, as well as short term events such as tariffs.

            In the short term what do you expect soybean prices to do if the tariffs are lifted, or China promises to buy xx% more in 2018-19? How is soybean acreage planted and weather doing in China? What twill China do if they negatively impact China’s own soybean production?”

  23. PeakTrader

    The Trump fiscal expansion increases the likelihood the Fed has time to unwind much of its balance sheet, and reduce the uncertainty of unwinding. And, it’s likely, two more Fed hikes this year and three more next year, raising the Fed Funds Rate to a little more than 3%, will attain a neutral stance. Depending on economic conditions in 2020, the Fed can pause, lower, or raise the Fed Funds Rate. It’s possible, a rare soft landing can be achieved, e.g. in 2020-21.

    Reply
    1. baffling

      notice how peaky touts our strong economy under trump, but yet he is already creating excuses with having a “soft landing”. you don’t have a strong economy and a soft landing peak. choose a path and stick with it.

      Reply
    2. pgl

      My! That other PeakTrader told us that the FED was running easy monetary policy.

      It is settled – PeakTrader is just a Russian bot who gets paid by the word!

      Reply
    1. CoRev

      2slugs, a lot of deem and gloom, but the article ends with the market is already starting to adjust.

      Reply
      1. pgl

        “Longer-term, of course, the problem could become more serious if China is actually able to replace a good chunk of its U.S. protein needs”.

        I guess you have no clue what this means but it undermines the serial nonsense you spread hourly!

        Reply
          1. CoRev

            Baffled, if that were true the style of comments would be focused on just me or a few, but these comments are generally focused on everyone not solidly behind your (includes all liberals) views. Amazingly you even turn on other liberal when they even hint at moving from solid support.

            We’re approaching 2 years after the election, and recovery appears further and further for y’all!

          2. pgl

            Alas – the more we respond to CoRev – the dumber we become. I think this is Trump’s grand plan!

          3. 2slugbaits

            CoRev We’re approaching 2 years after the election

            Yes, we are. And I should think 2 years ought to be plenty of time to have read a couple of standard econ textbooks. How’s the reading project coming along? Can you tell us which econ textbooks you’re read recently?

          4. baffling

            i honestly believe corev is actually too stoooopid to read and understand any textbook. talking points is about his highest level of reading comprehension, based on the nonsense we get from him on this site.

  24. noneconomist

    Speaking of easy to win trade wars, how about the one launched on multiple fronts (and mentioned by other posters here) in the late 20’s and early 30’s? There was the demand that Congress protect their constituents from “unfair” foreign competition. What to do? Easy. Slap some serious trade restrictions on the biggest–and then any–offenders.
    Seems Hoover knew Hawley-Smoot was a disaster in the making, but he signed the legislation.
    Short story: in 1929, global trade was $36 billion. By 1932, with tariffs at full fever here and in major European countries, it had sunk to $12 billion.
    American exports in 1929 had been about $5.3 billion. In 1932, they were down to about $1.2 billion.
    Not surprisingly, there’s no evidence of Hoover crowing about that as “winning” a trade war. Especially when the stock market resumed its fall and lots more banks failed.
    Moral of the story: those who cannot remember the past would never stoop to studying it anyway.

    Reply
    1. pgl

      Good point but might I suggest that some of the drop in world trade was caused by the Great Depression rather than the other way around. Of course policy in general under Hoover was a disaster. And Trump in many ways reminds me of Hoover.

      Reply
    2. Ed Hanson

      nonec

      I used to believe that S-H was the cause of the depression. But the work of Friedman and Schwartz showing the disaster of the policy of the Fed cleared that up. Do not interpret that to mean that I think S-H was good, I don’t. It had no purpose other than than mercantile reason of protection. This is unlike the current change in tariff which has the purpose of equalizing tariff among major economies (as well as correcting other unfair prqactices), thus stopping the penalty forced on US business.

      Ed

      Reply
      1. baffling

        ed, i would imagine those back in the 1930’s used the same arguments you used, ie we are not mercantiles, simply “equalizing tariff among major economies”. question: do we have any unfair tariffs applied to any of our international trade partners?

        Reply
      2. noneconomist

        If SH was passed to protect American jobs in industry and agriculture, it didn’t. Though it did not cause the Depression, it certainly assisted in enlarging financial wounds into severe bleeding.
        Over a thousand economists urged Hoover not to sign the legislation. They believed, rightly, it would raise living costs and detract from, not enhance, agricultural production. Then there was the matter of retaliation.
        Following its passage stocks continued their decline, and more—lots more—banks failed.
        Before HW was signed, Hoover said “We have now passed the worst…” In 1930, that must have constituted “winning.”

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      3. 2slugbaits

        Ed Hanson the current change in tariff which has the purpose of equalizing tariff among major economies (as well as correcting other unfair prqactices), thus stopping the penalty forced on US business.

        This has to be one of the stupidest things I’ve read in a long, long time. “Equalizing” the tariffs essentially means we want to inflict more pain on ourselves so that we’ll feel the same amount of pain as the Chinese. How idiotic is that? If China has a 25% tariff on American imports and we have no tariff on Chinese imports, our going to a 25% tariff does not cancel out the bad effects of the original Chinese tariff. It only makes us worse off. Why are you so hell bent on making us worse off? The best of all worlds would be a 0% / 0% regime without any tariffs. A less good outcome would be a 25% / 0% outcome. The worst of all possible worlds is when we both have a 25% tariff. “Equalizing” tariffs does not mean resetting things back to a zero tariff world. Keep your eye on the ball.

        And if you think Trump’s trade war is just a temporary negotiating tactic to get freer trade all around, then you’re living in la-la-land. Trump has spent 30+ years telling us how bad free trade is. Trump is just an old fashioned mercantilist, so in his mind the best possible world is one in which other countries have no tariffs on our products and we have high tariffs on theirs. That’s probably his idea of “winning.” It’s the kind of idiocy I’d expect from a lifelong NYC real estate guy who never read a serious econ book in his life.

        Reply
  25. 2slugbaits

    Bruce Hall I found this article about the “old mercantilist view of trade” in an admittedly reactionary right wing publication

    Yep, very stupid article. Here’s the lesson you should learn from all this (and it’s one I’ve been preaching for a long time): When it comes to economics in general and international economics in particular, almost all popular magazine and website articles written by amateurs and journalists are 99% bullshit. That’s true for both sides of the political spectrum. If you wanted to learn about chemistry, then you’d probably want to read something written by a professional chemist rather than a journalist. If you wanted to learn about geology, then you’d probably want to read something written by a professional geologist rather than a journalist. If you wanted to learn about fabrics worn by 19th century women in London, then you’d probably want to read a something written by a museum curator specializing in fabrics worn by 19th century women in London rather than a popular journalist. Why do you think it should be any different with the study of economics?

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