Planting season is progressing smoothly throughout the US. And while farmers welcome US and Chinese officials agreeing to temporarily reduce tariffs imposed on exports, a lot of uncertainty remains.
China is one of the top three importers of US food products after Canada and Mexico, and the escalating trade war between Washington and Beijing worries farmers, particularly grain farmers who lost money in last year’s harvest as bumper crops overwhelmed prices.
Despite farmers planting corn and soy crops this year, agricultural economists estimate that grain farmers could lose money again, as the total cost of production exceeds the current price, unless something changes.
In the 90-day truce announced on May 12, the US will reduce additional tariffs imposed on Chinese imports from 145% to 30%, while China’s tax on US imports will fall to 10%. The two countries will continue negotiations for the next three months.
Soybean farmers often get or lose in China’s trade talks. According to the American Soybean Association, 54% of our soybean exports went to China last year.
Soybeans were the victim of the trade war between Donald Trump and China during his first term in 2016. Between 2000 and 2016, the US share of soybean imports in China averaged around 40%, but by 2018 it had changed to Brazil due to oil plant needs.
The US and China eventually formalized trade for several years, but the US market share of China’s purchases did not recover. Last year it was just 22%, Akure said.
Caleb Ragland, president of the Soybean Bean Association and Kentucky soybean producer, and President Brian Duncan of the Illinois Farm Bureau, said they run grain and livestock farms in northwest Illinois, but the 90-day pose is not a long-term solution.
“We understand the importance of fair trade, but have historically supported a rules-based approach to trade, and we hope that negotiations here will lead to a productive framework,” Duncan said.
Duncan said investments farmers make in businesses such as machinery, land, livestock and crops are costs that are often paid over the years and are untamed costs. This makes trade uncertainty very difficult.
“We’re not getting the price, we’re getting the price, so we’re planting this crop, so we’re feeling anxious here, wondering what demand will be, and we’re realising we’ve been pushed further into Brazil’s weapons in the final round of the trade dispute with China,” he said.
According to the National Council of Pork Producers, China is also a key export market for pork in the US, where 55% of pork Ofaru products, which are not easily consumed domestically, such as going to China in addition to muscle cutting such as runny nose and feet.
Karl Setzer, a partner at Grain Merchandising consultant Consus AG Consulting, says farmer sentiment surveys, including monthly photographs by Purdue University, show farmers are optimistic and think tariffs are beneficial in the long term. He said some of the optimism may reflect the fact that farmers received subsidies from the Trump administration during the last trade war. Setzer wasn’t sure that optimism about tariffs would be justified in the long term.
Despite the Chinese line, both Setzer and Akure said that the US has other export markets selling grain and oilseeds, but are trading with China’s issues.
A potential concern is that the armistice will end in 90 days just before farmers begin harvesting in autumn.
With much of last year’s harvest being sold, the truce is in a lull in crop marketing, with farmers not making positive reservations for sales of new crops harvested in the fall. That makes it difficult to convey the impact of the armistice, Setzer said.
“We still don’t know what it means for new crops. Demand doesn’t actually start to increase until we reach June or July,” he said.