Norwalk Reflector: 'Impact of the tariffs is questionable'
logo


no avatar

'Impact of the tariffs is questionable'

By staff and wire reporters • Updated May 17, 2019 at 10:39 PM

WASHINGTON — Some say that American farmers, among President Trump’s most loyal supporters, face mounting financial pain from the president’s trade war with China. Locally, though, that may not be the case.

With the tariff war showing no sign of ending any time soon, many are concerned about the growing risk that the damage will outlast the conflict.

Reports have indicated the standoff with China over trade sold be compounding the strain of five years of falling commodity prices and losses from spring flooding. And as the dispute drags on, China is forging relationships with competing suppliers and farmers in other countries are reorienting operations to cater to the Chinese markets.

Some say among the hardest hit and most vulnerable to continuing tensions are soybean growers across the U.S. grain belt.

Mike Gastier, OSU agricultural extension educator and Huron County director, disagreed. Gastier said the tariff war between the two countries is impacting local farmers, but not as much as some may think.

“Prices are plummeting, but the impact of the tariffs is questionable,” he said.

“Impacting the prices more directly is the disease they have in swine in China. That’s really slowed the demand for soybean meal feed in China. Don’t get me wrong ... tariffs aren’t helping. It’s making the soybean meal more expensive (in China), but that’s not as big of an impact on the price drop we see here as the swine disease.”

Gastier said it’s true soybean futures on Monday skidded to their lowest prices in more than a decade and are down more than 20 percent from a year ago.

“The price decrease and, of course, delayed planting are on everyone’s minds right now. The price decrease of the last five or six years are dramatic — very dramatic. Prices are less than half what we saw last year. We are below break-even price on crops.”

Some agricultural leaders harshly criticized the latest escalation.

“Washington, D.C., has made another miscalculation, and the livelihoods of farmers and the communities they support is threatened,” Lynn Rohrscheib, president of the Illinois Soybean Growers, which represents 43,000 farmers in the state, said in a statement Monday. “Illinois soybean producers face greater challenges each day without a deal. We see no end in sight.”

The sense of peril was evident in the president’s announcement Friday in tandem with new tariffs on China of an ill-defined plan to help farmers with $15 billion in assistance that would come on top of the $12 billion in aid announced last year. Agriculture Secretary Sonny Perdue said he is working on a plan and will submit it to the president within “a few days to a couple of weeks.”

Gastier said this is a “temporary fix” and more of a Hail Mary to carry farmers over until a longer-term solution comes. He said only time can heal this wound. 

“This is not a long-term fix, it’s just a short term solution,” Gastier said.

Republicans from other agriculturally counties warned that patience is waning among some farmers though.

“I’d say the farm community is right on the edge of having been as supportive as they can be before that begins to turn,” U.S. Sen. Roy Blunt (R-Missouri) said. “But hopefully the president will come to some conclusion here soon.” 

“Usually the market sorts itself out over time — it’s just painful in the meantime. It’ll help temporarily. ... For what it’s worth, in my opinion it’s a short-term fix though. It’s not any type of a real solution. The market’s just going to have to sort things out.”

 

‘Feeling the Pinch’

U.S. Sen. Joni Ernst (R-Iowa) said that farmers in her state “strongly believe that China should be held accountable, but they are also feeling the pinch and need to see that market back open for trade.”

Farmers aren’t likely to turn wholesale against Trump any time soon. “There could be some erosion of Trump’s support in the rural base of the electorate,” but for the most part they will “stick with Trump,” said Mack Shelley, a political science professor at Iowa State University.

Yet even a modest shift to Democrats or a loss of enthusiasm among his supporters could be consequential in the next election. Trump dominated rural America with a 28 percentage point advantage over Democrat Hillary Clinton in 2016 yet lost the popular vote. He only won the Electoral College by carrying Wisconsin, Michigan and Pennsylvania through a combined margin of less than 80,000 votes.

The trade war is already reverberating through American agriculture, as farm exports to China plunged from $19.6 billion in 2017 to $9.2 billion last year. Overall, U.S. farm income dropped 16 percent last year to $63 billion, about half the level it was as recently as 2013.

The rainy spring this year makes things worse. Midwestern farmers typically choose between planting corn or soybeans but corn requires earlier planting. But the window for corn is running out as farmers wait for fields to dry.

“This could really be a double-whammy if they wind up planting more soybeans than they would have otherwise, if they can’t get a corn crop in,” said Joseph Glauber, former chief economist of the U.S. Agriculture Department. “Some people are going to have financial difficulties with this. If the prices continue to hold at these levels, people are going to burn working capital.”

Farmer bankruptcies in six Midwest states rose 30 percent in 2018, according to the Federal Reserve Bank of Minneapolis. A report by First Midwest Bank in Chicago showed past-due agricultural loans up 287 percent in 2018 over the previous year.

 

Who benefits?

Jonathan Coppess, a University of Illinois professor of agricultural policy and former head of the U.S. Farm Service Agency, said that U.S. farmers’ overseas competitors will gain more advantage as the dispute persists.

“There’s ripple effects. That then changes farmer behavior in different countries,” Coppess said. “Overall you could have more soybean acres. That then creates more soybean production worldwide. You don’t just turn it off.”

Brazil, American soybean producers’ strongest global competitor, only emerged as a producer following an export embargo President Richard Nixon imposed during the 1970s that caused Japan to search for alternative suppliers and farmers in Brazil to turn to the crop.

“History suggests these trade decisions cause significant changes in the market,” Coppess said.

Brazil was poised to overtake the U.S. as the world’s biggest soybean grower in the 2019-20 growing season, only the second time it has done so, according to a U.S. Agriculture Department forecast released Friday.

Gastier though said he feels no one benefits from the tariff war. He said there may seem to be some temporarily positive aspects for countries like Brazil, but even they’re seeing the effects.

“Now the price of soybeans worldwide as dropped,” he said. “The hog disease really provoked a huge decrease in demand, especially in China, and thats mainly driven by the swine fever. That’s on a worldwide market though. Initially, the tariffs may have given South America an advantage in soybean meal, but now their prices are low like everyone else’s around the world.”

 

EDITOR’S NOTE: Mike Dorning of Bloomberg News (TNS) and Zoe Greszler of the Norwalk Reflector contributed to this story.

———

©2019 Bloomberg News

Visit Bloomberg News at www.bloomberg.com

Distributed by Tribune Content Agency, LLC.

Norwalk Reflector Videos