Farmers concerned about trade war implications
By Mike Lamb
MORGAN — Leon Wiens of Minneapolis left the Congressional forum at the 2010 Farmfest Tuesday still searching for answers on the present trade war launched by President Donald Trump.
He decided to stop at the CHS tent for a presentation by Russell Consulting marketing manager Kent Beadle on “World trade and its impact on U.S. Supply and demand.” Beadle analyzes the commodity and financial markets for his clients. CHS is a Fortune 100 business owned by U.S. Agriculture cooperatives, farmers, ranchers and stockholders.
“Do you think it took some action like this to get it (trade negotiations) started?” Wiens asked Beadle. “I just came from that tent over there (the congressional candidate forum) and everybody has the answers on this side and that side. And none of it makes sense. I’m not a farmer, but I’m a consumer.”
Beadle didn’t offer any predictions, but he tried to give some analysis.
“Here’s the best I can do,” he said. “When the negotiators are done, they are either going to succeed or they are going to fail. And there will be plenty of blame and plenty of praise to go around at that point of time. Right now I don’t know if he (Trump) is doing the right thing or the wrong thing. I do know what he’s doing has caused harm to rural America at this moment in time.”
Beadle’s remarks on Tuesday were made on the same day that the Trump administration announced that it would go ahead with imposing 25 percent tariffs on an additional $16 billion in Chinese imports. Customs officials will begin collecting the border tax Aug. 23, the Office of the U.S. Trade Representative said.
In April, the administration had announced plans to slap tariffs on 1,333 Chinese product lines worth $50 billion a year. After receiving public feedback, it cut 515 products from the list in June and added 284. On July 6, the U.S. began taxing the 818 goods, worth $34 billion, remaining from the April list.
And China has been retaliating in kind.
And Beadle wasn’t the only one searching for answers at Farmfest this year. The trade war was a big topic of conversation throughout the many booths and displays.
Many farmers said they see the need for better trade deals but are concerned about the financial impact that many are already feeling. The tariffs and counter tariffs worldwide have caused decreases in sales and the prices of some key U.S. farm exports. Mike Hewitt, who farms near Walnut Grove, said that since China placed a tariff on U.S. soybeans, he’s watched the price of the crop drop almost 20 percent. “They’re below breakeven, so we’re not making any money on soybeans,” Hewitt said. But he said he remains optimistic that the president’s trade actions in the long term will improve the profitability of foreign trade for all sectors of the U.S. economy, including farmers. Fred Dauer, who farms near Springfield, estimates that he’ll earn about $30,000 less on his crop this fall compared to last spring because of the drop in soybean prices. “It’s beyond fixing already for this year,” Dauer said. “It just is. It’s not going to happen. The price reduction has come about, and we’re not going to gain it back.”
A Minnesota analysis found that farm income fell in 2017 by about a fifth over the previous year. The Trump administration has promised about $12 billion dollars in assistance to farmers hurt by the trade disputes. But it’s unclear how much assistance farmers will receive.
Beadle explained the long term effects on the farm economy, if the trade war persists without any agreements.
“Well clearly, if we don’t get these deals, the long term impact is more strain on the U.S. farm economy and we already endured quite bit of that,” he said. “We burned quite a bit of equity in farm country in the last three years.”
Beadle warned that the trade war may encourage more competition from other countries to fill the void in such markets as China.
“If they open up more land in Brazil, I think that could turn out to be a medium term concern, not a long term concern. Because if world economic growth continues, it may turn out we are going to need to open up some of those Brazilian acres any ways to feed the additional mouths in the world. But short term, that additional competition will not necessarily be good,” Beadle said.
“Tariffs and retaliation has really harmed U.S. farms and ranchers and harmed rural communities as farmers have less dollars to spend. So at CHS, we are diligently encouraging Congress and the administration to find something comprehensive and thoughtful to fix this trade environment and provide open and fair markets over and above government assistance. Because we need open and fair markets.”
The soybean market is the biggest concern among southwest Minnesota farmers.
“Soybeans (exports) for a number of years were flat between about 30 and 40 percent of our production,” he said. “What’s interesting is that over the last seven or eight years we have seen that number grow and grow fairly dramatically. We are now exporting between 45 and 50 percent of our soybean production. And as we look at market share, that market share is going down. Again, it’s not because we are exporting less beans, it’s not because the market was “stolen” from us. It’s because world demand has grown and the Brazilians actually have the acreage to provide additional production to meet that additional world demand.”
Despite the present pain endured by soybean farmers, Beadle remains optimistic.
“Is this going to last forever?” he asked.
“Well, we continue to hope we get agreements. But even without agreements, eventually Brazil is going to run out of soybeans. China will buy and buy their entire crop, but that’s not nearly enough of what they need going forward. So eventually what will happen, as Brazilian markets tighten up, Brazilian prices will go up. Even without agreements we are going to bridge the 25 percent tariff gap between Brazil and U.S. and when that happens, China will come to the U.S. and buy beans for their Chinese crushers and pay the 25 percent tariff. That will be the cheapest bean in the world,” Beadle said.
“When will that happen?” he again asked. “We don’t know. Best guess, November plus or minus. And that means that October is in jeopardy. We are in jeopardy of losing October if we don’t get a deal before that.”
EDITOR’S NOTE: The Associated Press contributed to this report