Michaela Rehle/Reuters

China is the world's largest importer of soybeans, and traditionally they have come from the US.

American exports of soybeans have fallen dramatically because of the US-China trade war, however, hurting US farmers.

Even if a deal is reached, China could continue relying on Brazil and other countries for its soybeans.

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US farmers have been hammered by the US-China trade war, and the pain could linger even if the two sides strike a deal.

American and Chinese officials are meeting in Shanghai in a bid to hash out a trade deal that would benefit both sides. US farmers have a large stake in the negotiations, as agricultural exports to China have slumped and reports of crops rotting in fields have become commonplace. That trend could accelerate if China permanently turns to other markets for its crops.

Earlier this year, Markets Insider reported that the US paid roughly $16 billion in subsidies to farmers to help ease the pressure from President Donald Trump's trade war with China.

Soybean diplomacy

To understand this you need to understand soybeans. China loves soybeans. Really loves them.

China imported 88 million tons of soybeans from America last year, down from 95.5 million in 2017, according to customs data. The volumes have particularly plunged since the trade war began in the spring of 2018, according to Bloomberg.

US Department of AgricultureChina has now turned to Brazil for its soybeans to avoid tariffs. The South American nation is set to become the largest producer of soybeans by 2020, according to the US Department of Agriculture. The new supply route could mean US producers remain out of favor even if a trade deal is signed.

"Brazil has massively benefitted from the trade dispute," Geoffrey Yu, the head of UK investing at UBS Wealth Management, told Markets Insider in a phone interview.

Yu added that China had diversified its import sources, and Latin America — including Brazil — had been a major beneficiary. "Whether trade would have picked up anyways is up for debate, but if Chinese-Brazilian relations get better, then we could see the imports of soybeans grow," he said.

"Though I would say we should take this with caution, as the demand for soybeans from China has fallen since 2018," he added, "but still, compared with 2017 Brazilian imports, is much higher."

Wang Yi, China's foreign minister, visited Brazil last week. He may have been looking to shore up soybean supplies from the nation.

Even though the talks in Shanghai are hugely important for both the US and China, the damage could already be done to US farmers.

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