As the trade war between the U.S. and China heats up, North Dakota soybean processors are watching their selling season go to ruin. The head of the North Dakota Trade Office says Chinese buyers have killed all of their firm orders for food-grade soybeans, valued at $1.2 to $1.5 million. The cancellations happened just prior to and immediately after tariffs went into effect in July. North Dakota processors usually sell $30 million to $35 million in food-grade beans to China annually - with most of those contracts finalized in the summer months. They get those beans from farmers who they contract with before seeds are planted. “Our food grade processors are normally working between July and August to lock in contracts with foreign customers,” says Simon Wilson, Executive Director of the North Dakota Trade office. “With China now on the sidelines they are working other Asian countries to see where they can sell the product." He adds that even if they find new buyers, sales would be less profitable, "as moving to new customers drives lower margins than established ones.” According to the state’s trade office, food-grade soybeans represent 6 percent of total foreign sales, with China being the largest buyer.

China does have a choice

“That leaves around 230,000 acres of premium soybeans without a buyer,” said Simon Wilson, executive director of the North Dakota Trade Office. “We are in a trade war and the farmer and processors are taking the brunt” of it. Even though some observers say Chinese buyers have no choice but to deal with the U.S. eventually, with another round of tariffs imposed on China Tuesday evening, Wilson says that Chinese customers are sure to look to Canada and other growers to fill their needs for food-grade soybeans. And, if processors can't replace those sales with other buyers, they will be forced to store the food-grade soybeans, an unappetizing prospect. “This is for human consumption so the quality and freshness of the bean is first and foremost,” said Wilson. Simon tells CNBC the next 30 to 45 days are critical for farmers in the state as they start to lock down contracts for next year’s crop. Reduced demand now could force farmers to move to less lucrative crops next year, he added, further hurting their bottom lines.

Responding to these concerns, a U.S. Department of Agriculture spokesperson said in a statement, “The President is standing up to protect our national interests, including holding China accountable for unfair trade practices and theft of intellectual property. Because of the trade disruptions, there is understandable anxiety in the agriculture sector. The President has directed Secretary Perdue to use the tools at his disposal to ensure that American agriculture does not bear the brunt of retaliation from foreign nations.” However, the spokesperson declined to elaborate on what those tools might be: “It would be unwise to unveil the playbook while other nations are watching, but if conditions warrant, USDA will quickly begin fulfilling that promise to support producers who become casualties of these disputes.”

One-sided trade war