• China is the world's largest importer of soybeans and traditionally they have come from the US.
  • American exports of soybeans have fallen dramatically due to the US-China trade war, 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 they could be left out in the cold even if the two sides strike a deal.

American and Chinese officials are currently meeting in Shanghai in a bid to hash out a trade deal that would benefit both sides hugely. 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 get worse if China permanently turns to other markets for its crops.

Earlier this year, Markets Insider reported that Trump was forced to pay roughly $16 billion in subsidies to farmers to help ease the pressure from his 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, slightly down from 95.5 million in 2017, according to customs data. That number has plunged due to the trade war, according to Bloomberg, as China has been buying fewer soybeans.

Brazil's share of the soybean market has rapidly increased during the trade war
China has turned to Brazil for its soybeans. 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," said Geoffrey Yu, Head of UK investing at UBS Wealth Management, in a phone call to Markets Insider.

Yu added that China has diversified their import sources, and Latin America - including Brazil - has 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.

"Though I would say we should take this with caution, as the demand for soybeans from China has fallen since 2018," he said, "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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