A regional analysis of trade policies affecting the soybean and soymeal market

Trade and exchange policy impacts of the soybean and soymeal market are evaluated using a nonspatial equilibrium model. The model is a nonlinear econometric model including all major trading members--exporters: U.S., Brazil, and Argentina--importers: EC, Spain, Japan, and EE. A U.S. dollar revaluation increases soybean and soymeal prices in all countries except the U.S. The percentage price increases elsewhere are much higher than the percentage price decrease in the U.S. This indicates that the U.S. faces a world demand which is more inelastic than U.S. export supply. Export revenue in U.S. dollars decreases more when the U.S. devalues against all countries than when it devalues against only importing countries where Brazil and Argentina share the revenue loss. Devaluations of the Brazilian cruzerio and the Argentine peso mostly affect the devaluing country. Each of these exporting countries faces an export demand more elastic than their export supply. There would be increases in soybean exports and less soymeal exports from devaluing countries;The model evaluates a hypothetical 20 percent import tariff of the EC in an attempt to discourage imported soymeal as a protein source and encourage their domestic grain utilization. An import tariff on soybeans alone leads to substitution of imported soymeal for soybeans. This policy is ineffective in reducing soymeal use in the EC and hurts the domestic crushing industry. An import tariff on soymeal alone is more effective, however soymeal consumption in the EC decreases only slightly. There would be soybean and soymeal price reductions in all other regions. The import tariff on the two commodities would reduce soymeal consumption in the EC the most. In all three cases, there would be price decreases, world trade decreases, and the U.S. would have the highest loss in export revenue;Removal of Brazilian export taxes which primarily impose a higher rate on soybean exports than soymeal export, would primarily affect the Brazilian internal sector but other regions very little. Elimination of export taxes would increase domestic soybean and soymeal prices, reduce domestic crushing levels, and reduce soymeal export. The Brazilian export tax policy is effective in keeping domestic prices of soybean and soymeal below world prices and encouraging the domestic crushing industry;The other scenarios considered include a lower EC corn threshold price and additional increase in soymeal consumption in Eastern Europe.