13 October, 2018
The Bella Vita apartment building rises high over the fast growing town of Luís Eduardo Magalhães in northeastern Brazil.
The 20-floor high structure provides housing for the very wealthy and people earning a lot of money. It comes with a private movie theater and helicopter landing area.
Local soybean producers have to pay as much as $500,000 to live in the Bella Vita. Nearby farm equipment sellers, car dealerships and building supply stores are also busy expanding their businesses.
About 8,000 kilometers to the north, in the United States, many farmers are setting limits on their spending.
At a recent trade show in Boone, Iowa, corn and soybean grower Steve Sheppard was in no hurry to purchase equipment for his farm.
"I'm not buying any machinery. I'm not spending any money," Sheppard said.
Two countries. Same business. Two different stories.
The reason is China.
A growing trade war between the United States and China is re-ordering the international trade in grains. After President Donald Trump ordered tariffs on Chinese goods, China announced tariffs on U.S. agricultural products. Among them was a 25 percent tax on soybeans, the single most valuable U.S. farm export. U.S. growers sold $12 billion worth to China last year alone.
The reaction has been quick. China, the world's largest importer of soybeans, has cut back on purchases of U.S. grain.
China is turning instead to Brazil, which has profited from Chinese demand to become an agricultural powerhouse. Brazilian soybean exports to China rose 22 percent by value between January and September of 2018, compared to the same period a year ago.
Brazilian producers are not only selling more grain, their soybeans have a higher price than beans from the United States, thanks to Chinese buyers.
Prices for U.S. soybeans have fallen to levels that American farmers say are below the cost of production. The drop has made the agricultural industry a concern for an otherwise healthy U.S. economy.
The Trump administration said in July it would spend up to $12 billion to help American farmers deal with trade-related losses. But, for the time being, Trump trade policies are helping Brazil, a major agricultural competitor of the United States. And American farmers fear the lost ground will be hard to regain.
Boon to Brazil
Like U.S. farmers, Brazil's farmers produce much more grain than is needed at home. Nearly 80 percent of Brazil's soy exports are now shipped to China.
Experts say Brazil's total soy growing area is expected to expand to a record 36.28 million hectares this season because of strong Chinese demand.
Once a rural area with farms stretching in every direction, the city of Luís Eduardo Magalhães is now home to 85,000 people. That is bigger than Sioux City, Iowa's fourth-largest city.
While Brazil's overall economy is hurting, the nation's agricultural industry experienced 13 percent growth last year. Chico Flores Oliveira is the managing partner of the John Deere dealership in Luís Eduardo. He said farm equipment sales grew 15 percent in 2017. And he expects the growth to continue this year.
The local property market is also improving. Another new luxury apartment building is set to open next year. Single-family homes are being built throughout the city.
U.S. farm communities hurting
The economic situation is much worse back in Iowa, long considered the heart of U.S. agriculture.
Iowa is the nation's top corn-producing state and the second biggest producer of soybeans. But its trade ties with some markets have suffered under Trump.
The president walked away from the Trans-Pacific Partnership, a trade agreement that would have opened markets such as Japan to more American farm products. His renegotiation of the North American Free Trade Agreement had Mexico exploring other suppliers, including Brazil. Now the Chinese are pulling back.
The city of Boone lies right in the middle of Iowa. Worries about the U.S. trade war with China were evident at the recent Farm Progress show, which comes to Boone every other year.
Equipment dealer Lee Randall noted prices of used tractors and other equipment have dropped over trade tensions and low crop prices.
Farmers' problems are also showing up on bank balance sheets. The percentage of local agricultural loans reported as having repayment problems was up earlier this year.
Rodney Jensen, who farms near Algona, regrets not making deals to sell soybeans from his autumn harvest when prices were higher. Like many farmers, he is storing his crop, waiting for better times.
He worries China will not buy as much U.S. soy as it used to, even if the two nations settle their differences.
"It's been pretty pessimistic around here," Jensen said.
I'm Jonathan Evans.
And I'm Caty Weaver.
The Reuters news agency reported this story. George Grow adapted the report for VOA Learning English. Hai Do was the editor.
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Words in This Story
pessimistic – adj. deeply distrustful
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