Soybean farmers are weathering trade war
President Donald Trump has committed $12 billion to protect American farmers hurt by his trade war, setting off a political firestorm over trade policy.
But growers of soybeans — the single largest agricultural export to China, worth $12.4 billion — have largely escaped financial damage thus far, raising questions about the purpose and timing of the bailout, say economists, commodity traders and farmers.
While soybean prices have plummeted in recent months as China slapped tariffs on $45 billion of U.S. goods, the complexity of the markets where they are sold has insulated many growers from financial harm in the short-term.
“We probably don’t need (the aid) on our farm,” said Anna Balvance, who raises soybeans and cattle in northern Iowa and is expecting strong profits this season. “A lot of guys are skeptical of it. It’s not going to change the way we do business.”
Soybean growers have been cushioned by the widespread use of forward contracts that allowed many to lock in high prices last spring, and analysts predict they will be buoyed at harvest by strong global demand for soybeans.
The situation is similar for grain and oilseed crops, as well as pork, which was also hit by Chinese tariffs but enjoyed year-high prices in May and June.
“Who knows what the price would’ve been without tariffs,” said Dustin Baker, an economist with the National Pork Producers Council. “But for the most part, producers haven’t lost money yet this summer.”
Some commodities have been hurt, and China’s tariffs arrive at a time when the U.S. farm sector has been strained by consecutive years of record production and depressed prices. The European Union, Canada and Mexico have also imposed tariffs targeting U.S. agricultural exports, including pork, bourbon, cheese, apples and peanut butter.
Some farmers have also taken a financial hit from U.S. tariffs on steel and aluminum, which have increased costs for building materials and farm equipment.
But the overall resiliency of America’s largest export crop to trade measures — at least to date — speaks to its global dominance of grain and oilseed production, analysts say.
And it raises questions about the logic of using payouts to shield farmers in the short-term without taking measures to avoid a prolonged trade war. Many of the mechanisms protecting farmers this season will weaken next year if prices remain low.
“I know my soybean farmers might be interested in (the aid package),” said Sen. Chris Coons, D-Del., during a committee hearing with U.S. Trade Representative Robert Lighthizer. “But they’d rather have longterm contracts than short-term payments.”
The promised aid package is the result of months of research by the Agriculture Department, officials said.
The three-pronged approach would include direct payments to farmers, efforts to promote U.S. goods abroad and an expansion of a program that purchases surplus farm goods and distributes them to food banks. The USDA has promised aid to producers of soybeans, corn, cotton, wheat, pork, dairy and several other goods, although soybean farmers are expected to receive the bulk of the payments.