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Agriculture braces for effect of trade tiff

August 3, 2018

MOUNT VERNON, Wash. — Local industries including agriculture, manufacturing, construction and publishing are bracing for a potential negative impact caused by weeks of international trade disputes.

In late May, the Trump administration imposed tariffs — a tax on imports or exports — on steel and aluminum from Europe, Mexico and Canada, according to the Associated Press.

The countries hit back with billions of dollars in tariffs on U.S goods ranging from orange juice and whiskey to blue jeans and Harley-Davidson motorcycles. U.S. agriculture is vulnerable to Mexico’s retaliations, which included tariffs on pork and cheese.

On July 6, these tariffs were joined by retaliatory tariffs from China targeting agricultural products, including grains, tobacco and whisky, according to an article in the Los Angeles Times.

These tariffs, along with a 30 percent tariff on Canadian uncoated paper, are among the main concerns for Skagit industries.

Skagit County farmers have weathered poor economic times in the past, Washington State University Skagit County Extension Director Don McMoran said, but a trade war will have a disproportionate impact on small local farms such as those in Skagit County.

“If the trade wars occur it will affect the pocketbooks of the Skagit County farmer and some of them will end up going out of business,” McMoran said. “This has been the model of agriculture in the United States since its creation and unfortunately it affects the smaller scale farms the worst.”

Large farms have more access to capital and can typically weather economic storms better, he said.

Of the range of crops grown in Skagit County, McMoran said he’s most concerned for the county’s dairy, berry, seed and grain farmers.

McMoran said he estimates half of the county’s grain is being exported, mostly to Asia.

As for dairy farmers, Darigold board member Jeremy Visser said this year was starting to look up after years of slim margins. That ended abruptly when talks began of tariffs against Mexico, which imports a large of amount of dairy products from the U.S.

For a commodity-based market such as dairy, fear of a tariff can be worse than the tariff itself because it unsettles the market, Visser said.

“We’re very market sensitive,” said Visser, who represents Skagit-area dairy farmers to Darigold. “If there’s an upset, it reverberates throughout the U.S.”

Darigold contracts with 28 dairy producers in the Skagit area, Visser said. The company exports about 35 percent of its product — mostly to Mexico and Asia. Visser said he’s particularly concerned about losing Mexico, the primary market for many dairy ingredients, as a trading partner.

“We as a company — we as an industry — are preparing for the worst,” he said. “Unfortunately, when you have a situation where you prepare for the worst and everyone else does too, it’s really disruptive to prices.”

The county’s berry industry is also vulnerable in trade disputes, McMoran said.

At Sakuma Bros. Farms in Burlington, CEO Danny Weeden said while most of the company’s fresh berries are sold domestically, over half of Sakuma’s processed products, such as frozen blueberries, are exported to countries such as Japan and South Korea.

Recent tariffs could indirectly affect Sakuma Bros., he said, by causing producers who export to Mexico and Canada to keep more of their product in the U.S. market. That could drive domestic prices down, he said.

“We’re all just kind of watching and waiting,” Weeden said.

How Skagit County’s seed market will fare during trade disputes depends on the company — some export, while others sell the majority of their product domestically.

As a whole, McMoran said Skagit County’s seed industry exports about 25 percent of its product.

Dave Armstrong, CEO of Burlington-based Sakata Seed Company, said he’s concerned for the company’s global market.

The company contracts about 30 farmers to grow seed on close to 2,000 acres in Skagit County, Armstrong said. That seed then goes to a processing plant in Burlington, where it’s cleaned, packed and shipped.

Shipments of seed coming from the Burlington factory can be worth $20 million or more, he said. The majority of that is exported to Asia, Europe, Canada and Mexico.

The company also contracts with seed farmers in other countries, then importing the seed back to the U.S. for processing in Burlington.

“It’s a global hub of seed movement. The actions being taken and threatened would absolutely add complexity and barriers to our ability to move seed in and out of the U.S.,” Armstrong said of recent tariffs.

A trade war would force the company to make decisions about how and where it produces seed, he said. In a worst case scenario, that could mean moving production out of Skagit County — affecting a $2-million-a-year industry.

“I want to be sure not to imply that’s happening,” Armstrong said. “That’s not on the verge of happening, but it’s the worse-case scenario.”

Andrew Lam, an agronomist for Universal Seed Company, said tariffs aren’t likely to affect the company’s operations in Skagit County because the majority of its product is sold domestically. But he said he is worried about the cost of farm equipment going up as a result of tariffs on metals.

Save Family Farming Executive Director Gerald Baron said many farmers were initially hopeful about trade talks, but as retaliations against U.S. tariffs mount, there’s a growing concern in the agricultural community.

“Everybody is hoping for readjustment, but we’re not seeing the positive results of the negotiation yet,” Baron said. “At least not yet. It’s not to say there isn’t hope that there will be, but I think there’s a growing sense of concern.”

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