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Trade war’s first domestic casualties could be farmers and ranchers

August 17, 2018

As domestic steel producers gain early benefits in the intensifying trade war, a second group of U.S. producers is shaping up to experience the flip side: the nation’s farmers and ranchers.

With China and other U.S. trading partners using targeted retaliatory tariffs, agriculture producers are showing early signs of the conflict’s negative consequences.

Soybean commodity prices are just one early example. Between May and July 2018, soybeans prices dropped 20 percent, or by about $2 per bushel.

According to some agricultural producers and ag economists, because farmers were already struggling with sagging commodity prices, the impact of the trade war could be the start of something more far-reaching.

And there is concern that a lengthy trade war could damage already established international trade relationships, further hurting farmers and ranchers who export most of their crops.

“Our profit margin is less than 20 percent,” said Anne Meis of Elgin, who serves on the Nebraska Soybean Board. “We were trying to make a profit when we were selling our beans at $10 (per bushel). Well, now they’ve dropped below $8. Does that affect us? Yes, that’s like having a 20 percent pay cut immediately.”

Meis represents seven Northeast Nebraska counties — including Madison, Antelope and Holt — on the soybean board. She has been farming 1,000 acres of corn and 500 acres of soybeans with her husband, Jim, near Elgin for the past 30 years.

Like many farmers today, she’s grown more concerned about trade in recent months. It’s because in addition to affecting a farmer’s bottom line, the situation also impacts how much income is made available for operating costs and, by extension, support for local communities, she said.

“It’s going to affect the bottom line of farmers, which is going to affect downtown businesses in our small communities,” Meis said. “The economies are so based on the farmers and the ag economy that when you see a drop in commodity prices like this, you’re going to see it all the way down Main Street.”

Nebraska is undoubtedly an agricultural state, so economic impacts felt in that sector will be felt by many. It adds up to playing with big numbers.

In 2016, Nebraska was the fifth-largest agricultural state in the country, according to a recent Nebraska Farm Bureau report. Nebraska exported $6.6 billion worth of agricultural goods, with soybeans, corn and beef being the top-three goods.

The top-five exporting counties in the state are located in Northeast Nebraska, and two of those are in Meis’ region. Platte, Cuming, Custer, Holt and Antelope counties are the top five, in descending order, accounting for over $690 million in 2016. Madison County exported over $75 million in goods that same year, with soybeans as the top product.

And the trading partner hitting back the hardest — the one that imports most of Nebraska’s goods? That’s China.

It accounts for roughly $1.43 billion in ag purchases, according to 2018 Nebraska Department of Agriculture numbers, and is the top importer of Nebraska soybeans and the sixth largest market for beef.

Much like steel producers, farmers and ranchers have largely supported the Trump administrations plan to fix trade issues and right what has been unfair practices — especially with China.

In the 2016 presidential election, Nebraska voted overwhelmingly for Trump, at 59 percent to Hillary Clinton’s 34 percent. But by this summer, there are increasing voices expressing anger at Trump’s handling of trade.

“We’re putting already very financially stressed farmers under additional downward financial pressures with the drop in commodity prices,” said John Hansen, Nebraska Farmers Union president, referring to China’s retaliatory tariffs.

Hansen, who has been the Farmers Union president since 1989 and was a U.S. trade representative for 14 years, said Trump’s goal to fix trade is on point, but he’s been sloppy in the execution. And that’s hurting farmers.

“You have to stand back and look, where did this drop in value come from?” he asked, about falling commodity prices. “It’s the direct result of an intrusion into the marketplace from our government.”

With about one in four jobs connected to Nebraska agriculture, Nebraska Farm Bureau president Steve Nelson of Axtell is also concerned about the trade war.

“In general, I think tariffs are bad for trade,” he said. “Tariffs mess up trade, so ideally we would have no tariffs on anything. That allows free trade to work, and that’s very important.”

He credits Trump for having his eye on the trade issue, saying that he agrees with his attempts at getting players on a level playing field, but Nelson said he is concerned about the president’s approach because it’s causing significant disruptions to trade relationships.

It’s a sentiment shared by Meis.

Yes, there is short-term worry about monetary losses, but lasting damage to trade relationships also weighs heavily on her mind. Building trade relationships takes years, she said, and is at risk of being swept away.

“Those things don’t happen overnight, so for tariffs to be enacted is significant,” she said. “You can lose that relationship and business deal that you have established. It can be detrimental.”

With uncertainty clouding the board, most farmers simply want to ensure that they have a place to sell their goods, and they’re holding out hope that trade deals will be settled soon before international markets move away from U.S. producers.

“In the end, what farmers and ranchers want is markets,” Nelson said. “We have a growing world population and most of it lives outside the U.S., so we have to look outside the U.S. for markets. We produce more here than we can use.”

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