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KEY POINTS Last year at this time there were trainloads of soybeans headed to the Pacific Northwest from the Dakotas to meet orders from China.

But the U.S.-China trade war and tariffs on American soybeans has caused Chinese buyers to stay away.

That's proving to be especially painful for farmers in the Dakotas, where lower cash prices are offered by the local grain elevators.

Now there are so-called "refugee" soybeans that need a new home.

Soybeans are harvested with a Deere & Co. combine harvester in this aerial photograph taken above Tiskilwa, Illinois. Daniel Acker | Bloomberg | Getty Images

Soybean farmers in the Dakotas are on track to post a bumper crop, but that's little consolation given they are paying a heavy price in the ongoing trade war with China. Last year at this time, a grain elevator just south of Hillsboro, North Dakota, had filled three trainloads of soybeans headed to the Pacific Northwest in a single week to meet orders from China. This year it's a different story, due to Beijing's 25 percent retaliatory tariffs on American soybeans that went into effect July 6. "Now that China isn't buying any U.S. beans or very little of it, it's all backing up — especially in the Dakotas, where they've really expanded soybean acres over the years," said Terry Reilly, a senior commodity analyst at Futures International in Chicago. North Dakota soybean farmers are especially exposed in the U.S.-China trade dispute because of their dependence on China. The state's production of soybeans has soared more than 70 percent in the past five years, fed by China's demand and rail infrastructure that allows the commodity to travel to ports in the Pacific Northwest. "There have been no signs of demand coming back," said Nancy Johnson, executive director of the North Dakota Soybean Growers Association. "We still have seen no bids at the Pacific Northwest, which is where most of our soybeans are exported out of." Then again, some reports suggest China might be buying U.S. beans but through backdoor channels such as Argentina, which has been a large buyer of American soy this year. Argentina had a poor crop of its own this year due to unfavorable weather, so it's been gobbling up U.S. supplies. "Seventy percent of the soybeans leave our state for the [Pacific Northwest], and virtually 100 percent of that goes to China," said soybean grower Joe Morken, chairman of the North Dakota Soybean Council. With the lack of soybean demand at Pacific Northwest ports, that has meant local grain elevators in the Dakotas have been lowering cash prices for beans. The price partly reflects higher transportation costs getting the product to processors and export markets.

'Refugee' soybeans

"You've got these [grain] elevators in North Dakota, where all of a sudden their market they basically established themselves based upon China is now closed," said Mike Steenhoek, executive director of the Soy Transportation Coalition, a trade group. "They call them 'refugee' soybeans because they don't really have a home anymore." The price paid to soybean farmers is calculated on what's known as basis, which is the difference between the futures market price on the Chicago Board of Trade and what the local grain elevator is willing to pay. The basis has widened dramatically in the past year for North Dakota soy farmers, going from about 70 cents to $1 per bushel to closer to $1.55 to $2 per bushel. "We always have a bad basis up here because of our location," Morken said Friday. "But we're probably 60 cents worse than a normal year plus what the market has gone down at the Chicago Board of Trade since the trade war has gone on." Morken, who farms in Casselton, North Dakota, has harvested about a third of his soybeans and plans to store the vast majority of it to wait out the trade war. There's always a risk the trade war could last well into 2019 and leave farmers like Morken with full bins during the next harvest. "If this is still going a year from now, I don't know what happens, because I'm not going to have room for them, my elevator is not going to have room for them, and nobody is buying them," he said. Michael Langemeier, agricultural economist at Purdue University's Center for Commercial Agriculture, said the net benefits of storing soybeans this winter are attractive right now. "There's a strong price signal to store now, and part of that is the high yields expected from the current harvest," he said. Soy farmers in other areas, including Iowa, Illinois and Indiana, also have been adversely affected by the trade fight with China, given that the commodity has fallen about 17 percent in price on the decline in the soybean futures market since China announced the tariff. But because Midwest states are more diversified in terms of customers, the basis widening tends to be less pronounced than in the Dakotas. On Monday, Arthur Cos in the Arthur, North Dakota, area had a cash bid for soybeans of $7.03 per bushel, according to data on AgWeb.com. That was 89 cents per bushel below, or about 11 percent less than, what Ramsey Grain in Rochester, Illinois, was paying for the commodity. Last year, the U.S. exported about $20 billion of agricultural products to China, and soybeans accounted for more than $12.2 billion of that amount, according to the U.S. Department of Agriculture. China buys about two-thirds of the world's soybean exports, using most of it for soy protein to feed roughly 700 million pigs in the country or to make cooking oil. The soy also is used for feeding poultry and to support the country's fish farming sector.

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