Farmers remain patient as tariff drama plays out
Rensselaer farmer David Rodibaugh was optimistic that a recent day would bring several hours of much needed sunshine so he could finally begin planting his soybean and corn crops.
Those hopes were quickly doused when rain pelted down on his fields soon after he started, creating yet another hardship for Rodibaugh and other farmers who are being stung on several fronts by what some are calling a perfect storm of damaging events.
On top of what Rodibaugh said is perhaps the wettest spring in the Midwest in some 40 years, the farmers are faced with an oversupply of soybeans, an ongoing trade war with China that is poised to get worse, and the African swine flu that has claimed the lives of about 20% of the hogs in China, which have soy in their diet.
Farmers and economists said there are a number of factors that will determine how well individual farms can weather this storm. Some smaller farms will likely succumb to it, according to G. William Hoagland, a senior vice president with the Washington, D.C., think tank, Bipartisan Policy Center, who grew up on an Indiana farm.
Many farmers, like Larry Wappel Sr. of San Pierre, remain staunchly behind President Donald Trump and his tariffs. They said something needs to be done to stop the Chinese from stealing technology from American companies and committing other bad practices.
“I believe we had to do this. Past administrations have been so lax. When the Trump Administration says it will do something, they try to do it,” said Wappel, who farms in five counties in Northwest Indiana with his two sons.
Rodibaugh also believes something had to be done with China, but worries that some farmers — and those who provide support services to them — may not be able to survive should the tariffs continue for several more years and no other form of relief is found.
“My nephew’s a seed salesman. They have no backup. The fertilizer dealers and the local banks, they have no back up. This not only affects farmers, but local businesses might also be right in line for bankruptcy or they might go first,” Rodibaugh said.
“The long haul is becoming troublesome,” he said.
The price of a perfect storm
The tariff war had a swift and devastating impact on some farmers, particularly those who grow soybeans, are new to the occupation, have no outside income and have a lot of outstanding debt.
After Trump announced the first round of tariffs against China last year, the value of soybeans sold to the Chinese plummeted, dropping from $14 billion in 2016 to $3.1 billion in 2018, according to Hoagland, who cited U.S. government statistics.
Meanwhile, the price for a bushel of soybeans dropped from $10.50 a bushel in the summer before the tariffs started to around $8 a bushel now, said Hoagland, whose brothers still operate the farm in Indiana that has been in the family for more than 100 years.
Even with a $11 billion government bailout last year, net farm income in the U.S. dropped from $75 billion in 2017 to $63 billion in 2018, Hoagland said. Net farm income in 2013 was at $123 billion in 2013, said Hoagland, who cited government statistics.
On Thursday, Trump rolled out another $16 billion in aid for farmers hurt by his trade policies.
The tariff war could escalate
China recently announced it would slap tariffs on more than 5,000 additional U.S. products, including vegetables, in retaliation for Trump’s earlier decision to increase tariff from 10% to 25% on $200 billion of Chinese goods.
On top of that, the tariffs have resulted in price hikes for fertilizer, steel and other products farmers use.
The loss of the hogs in China has hurt soybean sales. Soybeans are part of the hogs’ diet.
“They lost 20% of their hog herd, which cut 20% of the food they need,” Wappel Sr. said.
And then there is the weather, which Rodibaugh said has been a cause of high anxiety for him.
“This will put us back another 3-4 weeks,” he said of the recent rain. “This will put us in June. This may be the worst spring in recent memory, perhaps in 40 years.”
Wappel said he’s doing OK, having diversified his crops to include peppermint and spearmint, which can be planted earlier in the spring and are sold to domestic companies for use as essential oils.
He said there has historically been a 10-year cycle of ups, downs and in-betweens for farmers. He believes farmers this time around will suffer in the short-term for a long-term gain of stopping Chinese theft of American technology. Hoagland isn’t so optimistic. “Can farmers, particularly those with small farms, survive over the next 4, 5 or 6 years if tariffs continue?” he asked.
“Some large commercial farms could ride it out. I’m not so certain about smaller farms, those with less than 1,000 acres. It will be tough going forward,” he said.
Hoagland said it takes time to develop markets and Brazil and other South American countries are as capable of producing soybeans as the U.S.
“If China doesn’t trust the U.S.to be a good supplier, it will go to other countries,” he said.
“A lot of my friends and family members in Indiana believe the president is doing the right thing and they’ll hang in there, thinking it will all work out to their benefit. I’m not that sanguine about it,” Hoagland said.
Looking for solutions
Rodibaugh said farmers are trying to facilitate other markets in the event the China market doesn’t comes back, and he’s pinning some of his hopes for new markets on the passage of the USMCA, a new North American trade deal with Canada and Mexico to replace NAFTA.
“The most important thing is to get NAFTA replaced. It’s extremely important,” Rodibaugh said.
Chances of that happening looked more hopeful after Trump recently announced he would lift tariffs on steel and aluminum from those countries.
Rodibaugh also is looking to new and expanded uses for soybean and corn, including biofuels.
Wappel said despite the surplus here, U.S. farmers can’t get their extra soybeans to the people in underprivileged countries where they could feed hungry people.
“We offered aid to Venezuela and its government rejected it,” he said. “I often wondered why.”
Wappel also believes those South American countries that take over the U.S. soybean market will eventually run out of the crop and China will have to turn to someplace else, perhaps back to the U.S., to fill their soy oil needs, which Hoagland said are used in their diet and cuisine.
In the meantime, the Trump Administration has talked about another bailout for farmers hurt by the tariffs, and those farmers also hurt by the relentless rain, like Rodibaugh, are considering filing a claim with their farmers insurance, if they have that insurance.
“We can get some relief from insurance to pay a significant portion of our expenses,” Rodibaugh said.
But what Rodibaugh hopes, and Hoagland said needs to happen now, is for the storm to break.
“The troops are getting restless. There are certainly differences among farmers. We want to be supportive, but we want some action. I’m surprised it’s gone on this long,” Rodibaugh said.
Added Hoagland, “Nobody wins in a trade war. That’s becoming obvious now. I hope this gets resolved and resolved quickly.”