Grain Bins


Give us trade, not aid

Posted on August 16, 2018

As the United States continues to spar and negotiate with its trading partners, the message from rural America grows louder and clearer: Farmers want trade, not aid.

In recent weeks and months, trade has been turned topsy-turvy. The U.S. and China are in a full-blown trade war, no deal has been reached on NAFTA and ag commodity prices have plunged. Farmers, many of whom voted for President Trump, are finding their patience is wearing thin and are making their voices heard.

A $12 billion aid package announced by Trump in late July will provide direct payments to farmers who raise corn, soybeans, wheat, sorghum, dairy and hogs. Although farmers won’t turn down the assistance, they say they would rather sell their crops for a fair price than receive government payments.

Pressure from farmers played a role in Trump’s decision to reach a verbal deal with the European Union that will result in more purchases of U.S. soybeans. However, any increase in sales to Europe will pale in comparison to the loss in sales to China caused by that country’s 25 percent tariff. In the most recent marketing year, China purchased 86 million tons of U.S. soybeans compared with 19 million tons purchased by Europe. And trade strategists have said China won’t back down.

Jim Sutter, CEO of the U.S. Soybean Export Council, says the biggest hit suffered by soybean producers was the Chinese tariff because that country purchases nearly half of the soybeans exported by the U.S. In response to the trade war, China has since increased its soybean purchases from Brazil.

“It will be hard to replace China if we don’t get something done. I think the government realizes it,” Sutter says. “It seems the rug has been pulled out from under us. We’re hoping there’s some sort of end game in place.”

Sutter notes that exports through the Pacific Northwest have been great for South Dakota and North Dakota. Without a Chinese grain market, that creates a demand problem in the Pacific Northwest.

The Soybean Export Council is looking at a lot of other international markets to offset some of the lost sales to China. Among the countries being targeted are Japan, Taiwan and South Korea, which typically buy soybeans on a seasonal basis. Brazilian soybeans are currently more expensive than U.S. soybeans, so that increases interest in ours.

“We’re trying to tell buyers around the world that soy is on sale,” Sutter says. “It’s the Saturday special.”

Cargill issued a statement that the trade conflict between the U.S. and China will lead to serious consequences for economic growth, including the loss of sales and jobs at home.

“We’ve already seen significant slowdown in producer sales of soybeans as more than 300,000 U.S. soybean farmers hold back their stocks due to the decrease in soybean futures and cash prices, which are down significantly from this time last year. The economic turmoil and uncertainties resulting from tariffs are harming U.S. farmers, as trade concerns have played a major role in this price drop,” Cargill stated.

As harvest season approaches, agricultural industry officials are seeing growing frustration over tariffs, the stalemate over North American Free Trade Agreement and Trump’s decision not to be part of a Trans-Pacific Partnership, a multi-country trade agreement.

Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF), says the discontent starts with traders and exporters.

“There is extreme frustration from people selling meat. My fear is it will flow back to producers. It already has, to some extent,” he says. “People agree with fair trade, but the tactics are kind of painful for agriculture at the moment.”

The three largest foreign buyers of U.S. pork are Mexico, the Hong Kong/China region and Japan. Mexico buys the largest volume of pork while Japan is the largest customer value-wise. May sales of U.S. pork were the second-largest on record, but tariffs hadn’t kicked in yet. Even without tariffs, pork purchases by China and Hong Kong were down sharply, primarily because China’s domestic pork supply is the largest it’s been in years. China now has a 62 percent duty on U.S. pork and a 37 percent duty on beef. Mexico imposed a 10 percent duty on pork in June and another 10 percent on muscle meats in July.

Thankfully, South Korea is “an absolute home run,” Halstrom says. Sales were up 44 percent for pork and 34 percent for beef, and the U.S.-Korea Free Trade Agreement has been renegotiated. The USMEF has extreme concerns in Japan, where annual purchases of U.S. beef reached $1 billion. Japanese duties on meat put the U.S. at a disadvantage with Australia, which has free trade with Japan.

“Without TPP or a bilateral agreement of some sort, we’re putting at risk $2 billion in trade in beef and pork,” Halstrom said. “We have genuine concern.”

The staff of Agri-Pulse talks regularly with farmers and others in the agriculture business and has developed a good sense of their attitudes on current trade issues.

“There’s been a lot of patience and there’s been a lot of patriotism. A lot of people who farm or ranch and live in rural America supported this president, and a lot still do because they think he’s in for the long haul on a lot of issues,” Agri-Pulse editor Sara Wyant says. “But there’s only so far I think they’ll be willing to go, especially those with more-leveraged financial positions.”

Younger farmers and those who didn’t forward sell or have an opportunity to take advantage of higher commodity prices earlier in the year are feeling the pain more acutely and losing patience, Wyant says.

“Those are the ones we hear from most who want something done now and not wait until the end of the year when they have to renew operating loans,” she says. “We had one farmer say he can support the president for a long time, but putting his name on the bottom line at a loan office doesn’t go very far.”

Wyant says to keep in mind that there have been some wins, such as renewing of the KORUS free trade agreement and China opening its borders to U.S. beef. There’s also renewed optimism that a NAFTA deal can be reached. Securing Mexican markets would make corn growers and pork producers feel better.

“There’s a heightened sense of hostility on a lot of issues. Members of Congress are hearing from constituents,” she says. “Getting something done before the end of the year is really crucial for this administration.”

Farmers from all parts of the Corn Belt gathered in Washington, D.C., in July and presented their concerns to their U.S. senators and representatives. Kevin Skunes, president of the National Corn Growers Association, said that organization will continue to advocate for administrative actions, including the rescinding of tariffs, free trade agreements and ethanol-friendly regulations.

“NCGA’s grower members are confronting their fifth consecutive year of declining farm incomes while facing high levels of uncertainty due to ongoing trade disputes and disruptions in the ethanol markets,” said Skunes, who farms in North Dakota. “Corn farmers prefer to rely on markets, not an aid package, for their livelihoods.”

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