The Trump administration dispatched two of its top trade officials to meet with farm groups in Washington last week and the message was straightforward: The trade war that has generated tens of billions of dollars in tariffs on U.S. farm commodities isn’t likely to be over soon and the ag sector needs to prepare for a lot more pain.
It was an unwelcome message that farmers pushed back on, according to interviews with nearly a dozen members from the different groups - the American Soybean Association, the Illinois Farm Bureau, the National Oilseed Processors Association and others - most of whom spoke on condition of anonymity.
Gregg Doud, the U.S. Trade Representative's chief agriculture negotiator, and USDA Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney met with the visiting farm group members, who mostly did not welcome their message of prolonged pain and the need to change the unfair trading practices of China, the European Union, Mexico and Canada.
John Heisdorffer, ASA
“Mr. Doud came over and spoke to us as a whole group … and his message was pretty much, give us some time to straighten this out,” John Heisdorffer, president of the American Soybean Association, told Agri-Pulse in an interview. “Our expression to him was … that we don’t have time.”
The primary focus of Heisdorffer and other ASA members is China’s 25 percent tariff on soybeans, a new import tax that has so far effectively halted U.S. exports to its biggest buyer of the commodity and sent Chinese importers to Brazil, where they have been paying up to a $60-per-ton premium.
Farmers might not be so scared if there was an end in sight to the trade war that the Trump administration has started with China, but one ASA official said there’s no sign of that after the meetings with Doud and McKinney.
“I did not get the impression that there is any kind of timeline – that there’s any kind of solution in sight,” said the official who asked not to be named. “We got no indication that there’s any progress being made at all. I think that’s very fair to say. We were pretty damn morose by the time (the meeting) was over.”
The escalation of trade aggression – especially between the U.S. and China – has been rapid this month. On July 6 the Trump administration hit China with tariffs on $34 billion worth of the goods it exports to the U.S. These tariffs are meant to persuade China to stop stealing U.S. intellectual property, but U.S. officials have said they would also accept a reduction in China’s trade surplus.
China was quick to retaliate, levying tariffs on $34 billion worth of U.S. goods, including soybeans, corn, wheat and a wide variety of other farm products. Since then, the aggression has escalated. Trump, angered over the retaliation, announced he would hit China with import taxes on another $200 billion worth of Chinese goods, which trade officials said would go into effect as early as September.
“This new round of tariffs heightens our concerns,” said Illinois Farm Bureau President Richard Guebert Jr. in a statement. “As the trade war with China stretches into the summer, it will continue to put pressure on farmers who are already battling low commodity prices and declining farm income.”
Soybean prices are already falling fast, and while some of that drop is due to a large crop, much of it is also a result of the Chinese tariffs, Heisdorffer said. And the longer this trade war lasts, the harder it will be on farmers, he added.
“I went through the '80s … We lost a generation of farmers in the '80s because fathers told sons, ‘There’s no use trying to farm and you ain’t going to make it. Go find a job in town.’ If this continues, I’m afraid we’re going to lose a generation of farmers because they’re not going to make it. Things are just too tight.”
With a large crop this year and the tariffs pushing down prices, 2018 is looking bleak, and that may mean more troubles at the bank for many, said Heisdorffer. USDA’s Farm Service Agency is widely considered the lender of last resort, but the ASA president predicted there will be more than normal demand for loans from the agency.
“I’m thinking about inputs for next year,” he said. “What we’re going to look at is tightening the belt where we can cut some costs. … Fertilizer we can always cut.”
Ag Secretary Sonny Perdue
The situation puts a lot of pressure on Agriculture Secretary Sonny Perdue to come through with the mitigation program he has been promising to unveil in early September. Earlier this month he suggested that the assistance package would incorporate the use of Section 32 of the Agricultural Adjustment Act Amendment of 1935, which allows USDA to take money from customs duties and use it for a wide variety of purposes like disaster payments and purchasing surplus commodities.
Perdue continues to count on farmers’ understanding and patriotism while the Trump administration takes on China, but he acknowledged Tuesday at an event held by Axios in Washington that farmers “can’t pay the bills with patriotism.”
Heisdorffer agreed: “You know what I’ve said about that? Farmers will be patriots right up to the point where they’ve gone broke, and then all bets are off. You can only go so far.”
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