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Tariffs on ag products take their toll here

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Tariffs on ag products take their toll here

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HARTINGTON - Agriculture is a staple of the United States economy, and in states like Nebraska it has a cultural stronghold for families that have farmed land for generations. With a large portion of U.S. crops being exported, these commodities were first on the chopping block when the United States and China began imposing tariffs on one another.

On July 6, the United States announced tariffs on $34 billion worth of goods, and China quickly responded with tariffs of an equal amount.The United States targeted goods by China such as automobiles, vehicle parts, helicopters and airplane parts, and other machinery technology, while China mainly targeted U.S. crops, meat, spirits, and automobiles.

One crop that has fallen into the spotlight is soybeans. In 2017, the United States produced nearly 4.4 billion bushels. That is the most ever produced by the U.S. and is two percent higher than 2016. America is the largest producer and exporter of soybeans, which creates an issue for China in the trade war. No other countries can provide the amount that the U.S. has in recent years on such short notice. Despite the trade war that is building, China will still need to buy soybeans in the short term, according to UNL Associate Extension Educator Jessica Groskopf.

“The biggest concern is how long will these tariffs last and what else will come forward,” said Groskopf.

She continued to mention that Brazil is a competitor in the international soybean market, but they would not be able to fulfill China’s needs in such short notice. According to USDA data from 2012-2016, China imports nearly 60% of our crop exports. 

Since China will majoritively still be purchasing American goods, soybean prices have suffered with the economic uncertainty that has surrounded these tariffs and any potential future ones that may be imposed. In early to mid May, soybeans were at a high of $10.54 a bushel according to the November Soybean Futures contract price, but prices quickly fell as fear of a trade war loomed. By July 9, the price dipped to $7.52 at the local Hartington Elevator Company.

Some farmers are lucky and already locked in their price before the tariffs. That means come harvest time these farmers may be mostly unaffected by the tariffs because their price is already locked at a certain point.

“Once we have their price locked in they are good,” said Hartington Elevator grain manager Jordan Kerkman. “That is the price they are getting because I already have my price set then. that is why there are people that already have their contracts done for nine plus dollars are looking pretty good, when today it would be eight dollars.”

Kerkman says that about half of the farmers around the Hartington area have locked in their prices. For the other half, it will be a waiting game of if the price per bushel raises high enough to sell come harvest time, or if the farmers will store their soybeans and wait for a price surge.

Because of this predicament that farmers have found themselves in, President Donald Trump announced a $12 billion bailout for farmers affected by the tariffs. However, there are skeptics that wonder the impact this bailout will have for small family farms when farming has increasingly been bought up by big business.

“It is difficult to tell what the impact of this will have until we understanding of how the support will be provided,” said Groskopf. “Once we have those guidelines we will be better able to assess the impact of the program.”

One thing that is known about the bailout is that it is intended to be short term relief, and that the success of the bailout may depend on how long the tariffs and this trade war lasts with China.

The Chinese government made sure to announce their tariffs after the United States did. Typically tariffs take effect at midnight, but because of the time difference between the US and China, their government did not impose tariffs until around noon.

Kerkman said that around fifty percent of farmers have already locked in their prices, and that there is a general feeling of hope regarding the whole issue.

“From what I have heard this is a short term quick fix that is good for now but won’t help a lot of people in the long run. I’d say everyone is hopeful that things will pick back up again. We are in a Republican state so we are hopeful a Republican President can do what we want.”

In Nebraska, then-candidate Donald Trump won by over 200,000 votes, and in Cedar County, he grabbed 81 percent of the vote with 3,533 votes compared to Hillary Clinton’s 572 votes in second. This trend runs true through most agricultural states that have traditionally voted Republican for decades. That is something that was not unnoticed by China when imposing tariffs.

“[China] knows who Trump’s base is and they know what markets to target to rattle the cage,” said Groskopf.

By no means are Nebraska farmers the only part of Trump’s base, but a part of a large agricultural society. He connected with a large part of the Midwest, and the South. Both are traditionally agricultural states that rely on the United States being a global leader in agricultural exports. 

On the brighter side of international trade, the United States and the European Union have begun to de-escalate from their own trade war after talks with European leaders resulted in agreeing to work on lowering tariffs and buying billions of American goods, including soybeans. Even beyond soybeans this is very impactful considering the level of trade that the United States conducts with the European Union.

In an email, Jessica Groskopf stated, “The EU-28 is a substantial trading partner, in 2017 they imported $283 trillion of U.S. products. This is approximately 18% of U.S. Exports that year (International Trade Administration, U.S. Department of Commerce). This is a great opportunity of the U.S. and EU to end current tariff escalations. Reducing trade barriers and tariffs, is good for both parties involved. It allows producers access to new consumers. Additionally consumers can purchase products from around the world at a competitive price. In 2017, $11.4 billion of the EU imports from the U.S. were agriculture goods. This is about 8% of the U.S. total agricultural exports (USDA Foreign Agricultural Service).”

The world has become a global economy. Ramifications of the housing market crash of 2008 could be seen across the world because of how integrated economies have become. No longer can a country of America’s size find use for all of it’s own goods domestically while still holding the same level of an economy. World trading has lifted up much of the world, including America.

There is uncertainty with what the future holds with this looming trade war. Some farmers can breathe easy for contracts that have already been made that guarantee pricing, other farmers are sweating over what decision is the right one at this point. With the uncertainty of how long this trade war can continue, due diligence is suggested to help farmers make the most of their economic situation.

“It is unknown how long these trade negotiations will go on,” said Groskopf. “There are several risk management tools available to help farmers and ranchers, beyond this $12 billion. These tools include having the proper insurance for their operation, crop or livestock, and implementing a written and proactive marketing plan to sell their commodities.”