U.S. growers picking up tab from trade war
Bloomberg
While the new U.S.-CanadaMexico trade deal brought some signs of relief to American farmers, most of the heartland economy is still suffering from the blow of President Donald Trump’s trade war with China.
Take for instance April Hemmes, who grows soybeans and corn on 1,000 acres in Iowa. She locked in prices for half of her soy crop between March and June because of the “rumblings of tariffs.” Then, China’s retaliatory duties hit in July. Now, as harvesting gets under way, the cash offers she’s seeing have dropped below her cost of production.
She won’t bother trying to sell the half of the crop for which she didn’t lock in prices. Instead, she’ll put them straight into storage, Hemmes said during an interview at the Women in Agribusiness Summit in Denver last week.
“The reality is that I may not have a chance to sell those above my cost of production.”
Hemmes isn’t alone. Across the U.S. farming world, producers are feeling the bite of the trade war, with everything from apricots to sorghum targeted by retaliatory tariffs. The dispute has exacerbated the impact of years-long low prices amid a glut of crops. Farmer profits will drop 13 percent this year to $65.7 billion, the government predicts, leaving growers more dependent on aid.
Here’s a look at some of the ways farmers are suffering:
■ Soybeans: One of the biggest repercussions of China’s 25 percent duties against American soy shipments is the divergence of price trends between the U.S. and rival exporters in South America.
Demand from China, which is looking for soybeans from everywhere but the U.S., has already driven up premiums for shipments from Brazil. Now, as those exportable supplies start to run out, it’s Argentina’s turn in the spotlight. In the meantime, American prices tumbled, and in many areas, cash prices have fallen below where futures are trading.
■ Sorghum: American farmers planted more than 6 million acres of sorghum this year. While that’s dwarfed by the roughly 89 million seeded with corn, it’s still a major U.S. crop and rings in with bigger acreage than rice or oats. The market has become dependent on shipments to China, where farmers use the plant to feed hogs, and moonshiners make it into a whiskey-like liquor called baijiu.
Cash sorghum prices have tumbled at Midwest elevators and ports in the Gulf of Mexico in recent months because of the trade tensions.
“Very little grain is trading, and what is trading is at reduced prices,” said Tim Lust, chief executive officer of the National Sorghum Producers in Lubbock, Texas.
“What scares me is that we worked for 35 years to get that China market, and
then it’s gone.”
—April Hemmes, soybean and corn farmer
■ Alfalfa: The value of U.S. hay exports reached about $1.5 billion last year, almost quadrupling over the previous two decades, as China became the main destination for the alfalfa variety. The trade war is expected to push prices down 7.5 percent and could cut revenue for alfalfa producers by about $377 million, according to a report from the University of California Agricultural Issues Center in Davis.
■ Cherries: Included in China’s $60 billion hit list announced last month were shipments of American fruits including apricots, peaches and cherries. The U.S. exports about $13 billion of fruit and tree nuts annually, with about 15 percent of that going to China and Hong Kong, David Magana and Roland Fumasi, senior analysts at Rabobank, said in a September report.
The Trump administration has looked to soften the tariff blow for farmers, with the pledge of about $12 billion in aid. But farmers like Hemmes of Iowa have maintained a steady mantra: “We’d rather have trade than aid,” she said.
“What scares me is that we worked for 35 years to get that China market, and then it’s gone,” said Hemmes, who’s also on the board of directors for the Iowa Soybean Association. “Markets don’t come back. Just to know that we worked for all those years, and then to have it gone, is frustrating to me.”