When US President Donald Trump began talking about tariffs in 2017, upper Midwest soybean farmer Jamie Beyer suspected that her crop could become a weapon. Two years later, she and her family are watching the commodity markets on an hourly basis as an escalating trade dipute between the US and China creates turmoil in the rural US.
“It’s hard to concentrate on planting when you’re constantly checking your phone to see if another [Trump] tweet has prompted a dip in the market,” said Beyer, of Wheaton, Minnesota.
Beyer’s family farms about 1,416 hectares in Minnesota and South Dakota and she said it has lost about US$230,000 due to the trade spat.
Photo: AP
These are days of “a little bit of panic” among farmers, she said.
The anxiety is also spreading to the agricultural lending industry.
One economist said the farm sector might face its greatest downturn in three decades.
Soybean prices plunged early this week to a 10-year low after Trump’s decision last week to impose punitive duties on US$200 billion of imports from China and China’s retaliatory tariff hikes on Monday on US$60 billion of US goods.
US officials then listed US$300 billion more of Chinese goods for possible tariff hikes, and China on Tuesday vowed to “fight to the finish.”
The trade dispute that began last summer has already hurt farmers, despite US$11 billion in relief payments that were doled out last year by the federal government.
The personal income of farmers declined by US$11.8 billion through the first three months of this year, according to the US Department of Commerce.
A similar pace of decline is expected in the coming months, the Federal Reserve Bank of Kansas City said.
“The domestic stress caused by the administration’s trade policy is nowhere more evident than in the agricultural sector,” RSM US LLP chief economist Joseph Brusuelas said.
“Should the current policy pathway not be changed, the farm sector is going to experience the greatest downturn since the late 1980s, driven by widespread bankruptcies and consolidation,” he said.
During the farm credit crisis of the 1980s, high interest rates and falling land prices led to widespread farm foreclosures.
One positive difference now is that land and farm asset values have been holding their own, and “overall, farm balance sheets look pretty good,” said Kent Thiesse, senior vice president and farm management analyst at MinnStar Bank in Lake Crystal, Minnesota.
However, working capital is becoming a problem, as the trade dispute comes after recent poor crop years in some areas.
Most farmers were able to get financing to plant a crop this spring, thanks in part to the federal relief payments, but “if there’s no government assistance this year we’re going to be looking at some serious losses by fall,” Thiesse said.
Trump on Monday said that more aid is planned.
US Senator John Hoeven, a North Dakota Republican who heads the US Senate Committee on Agriculture Appropriations, put the estimated amount at US$15 billion.
That could be key to some farmers. In southern Minnesota, for example, soybeans for fall delivery are bringing a price of about US$7.50 per bushel, about US$2 less than a year ago and about US$1 less than the break-even price.
“A lot of farmers say they’re not getting too excited to go out and plant soybeans, because you’re probably guaranteeing yourself a loss when you put them in the ground,” Thiesse said.
The trade dispute is also affecting other crops such as corn, as well as other industries such as livestock and steel, from which farm equipment is made.
The American Soybean Association said that it supports Trump’s overall goals, but that it “cannot support continuing and escalating the use of tariffs to achieve them.”
“The soybean market in China took us more than 40 years to build, and as this confrontation continues, it will become increasingly difficult to recover,” said American Soybean Association president Davie Stevens, who farms soybeans in Kentucky.
“With depressed prices and unsold stocks expected to double by the 2019 harvest, soybean farmers are not willing to be collateral damage in an endless tariff war,” he said.
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