TARIFF TALK
Announced Chinese tariffs on Oklahoma crops generate concern
Ongoing tariff escalations between the U.S. and China are being closely followed by agricultural producers in Oklahoma who could see their crop and livestock businesses impacted by those actions.
Farmers who grow soybeans are particularly concerned after this week's announcement by China that it will assess a 25 percent tariff on soybeans imported from the United States.
For Oklahoma soybean farmers, the effects of such a tariff likely are to have a chilling impact on the price they can get for their crop.
China is a major importer of U.S. soybeans, and about twothirds of Oklahoma soybeans are exported overseas after being shipped out of state, said
Paul Fruendt, a member of the Oklahoma Soybean Board.
“We have some concern,” Fruendt said Wednesday, noting local pricing for the crop fell about 4 percent in Wednesday's trading. “We may see a harsher price decline than in some other parts of the U.S.
“Our beans have to go out of state to be processed. So I am sure we will see a decline in prices, if this actually holds. The worst thing about it is that tariffs normally end up messing around the market system itself.”
In Oklahoma, soybean planting starts in April and runs through early July, while it is harvested from September through November.
Oklahoma is considered a minor producer of the crop on the national stage compared to other states such as Iowa, Illinois and Minnesota, but the crop has gained some popularity with farmers who can grow it.
Harvested soybeans are milled, creating soybean oil used for cooking oil and soybean meal integrated into swine feed as a protein source.
Data on Oklahoma agricultural statistics published in 2017 said Oklahoma farmers produced about 13.64 million bushels of the crop in 2016, and about 11.6 million bushels the previous year.
Fruendt attributed the increase, year over year, to an increase in planted acres (because of more profitable soybean prices, compared to wheat) and poor weather during part of 2015.
If prices were to fall too far, that could curtail future growth for the crop in Oklahoma.
While the tariffs concern Oklahoma's soybean farmers, wheat growers are dealing with other issues.
Don Schieber, a board member of the Oklahoma Wheat Commission, said Wednesday that China hasn't imported much U.S. wheat for about a decade, as the communist regime has heavily subsidized its domestic market to encourage more incountry production.
But wheat, Schieber observed, has been in an oversupply situation domestically for quite some time, exerting downward pressure on its prices.
“We have got so much wheat around, that I don't care who buys it. Just write a check, and we'll send it. We've got plenty,” he said.
As for ongoing negotiations between the U.S. and Mexico as part of the North American Free Trade Agreement, Schieber said wheat growers have been following that process more closely because Mexico imports much of its wheat.
“I don't know what the NAFTA thing is going to do to us. We will have to leave that up to the President,” Schieber said. “I am sure he has got a plan, so we will just have to see if it works or not.”
Meat producers
China also announced this week it plans to impose 25 percent tariffs on frozen pork and beef imports from the U.S.
Representatives of two organizations who represent those who raise pigs and cattle in Oklahoma say the ongoing battle between the two countries remains a concern.
“We are very dependent on our ability to export our product,” said Roy Lee Lindsey, the executive director of the Oklahoma Pork Council, adding that one out of every four pigs produced in the U.S. is exported overseas.
Lindsey said the industry has grown based on that ability to export.
“China has been a good market for us to sell to — more than a billion dollars of product was exported from the U.S. to there a year ago,” Lindsey said. “Our hope is that this is just part of an ongoing negotiation between the U.S. and China as they talk about how to balance trade between the two countries.”
Oklahoma is a significant contributor to the nation's pork industry, employing about 10,000 residents involved in the raising and harvesting of swine.
Another significant segment of the state's population, about 51,000, raise cattle in the state.
An organization that represents those producers, the Oklahoma Cattlemen's Association, also is concerned about indirect impact of the ongoing tariff debate.
While China plans a 25 percent import tariff on beef imported from the U.S., that's a relatively new market where the tariff's impact won't be felt much, an association representative said Wednesday.
Michael Kelsey, executive vice president of the organization, said the U.S. lost access to that market more than a dozen years ago after barring the import of poultry from China because of healthrelated concerns.
Ironically, Kelsey said the U.S. was able to convince China to reopen its market to U.S. produced beef about six months ago.
“We were just working on regaining some momentum in that market, so the tariff is really detrimental to doing that,” he said.
A bigger concern, Kelsey said, is the pork-related tariff, as it could create an oversupply problem of pork domestically that could push down its price for consumers.
That, in turn, would require beef and poultry producers to respond in kind, similar to market moves that happened about a decade ago after Russia barred the import of poultry from the U.S. into its country.
“Protein trade doesn't happen within a vacuum,” Kelsey said. “Changes in overseas exports such as these make beef less competitive because we have to lower our price to stay in ratio with chicken and pork, and that hurts us as well.”