Despite trade war reprieve, soybean farmers fear irreparable damage, lasting tariffs

Published: Jan. 8, 2020 at 3:24 PM CST
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Louisiana’s soybean farmers, still reeling from tariffs and low prices, experienced a win in December when President Donald Trump announced China had agreed to purchase $40 billion in U.S. agricultural products over the next two years. Skeptics though have found little comfort with the deal and worry about long-term harm to the nation’s farm economy.

The deal, expected to be signed on January 15, will double China’s commitment to American agricultural products and complete phase one of trade negotiations between the two countries. Soybean farmers fear China’s reluctance to honor the deal and the damage caused already by the administration’s protectionist trade policies.

“It’s a warranted concern that extends beyond Iowa’s soybeans,” said Michael Dolch, public affairs director for the Iowa Soybean Farmers Association. “Commitments up to this point haven’t always been held up by China. Commitments are different than assurances.”

Total U.S. soybean exports have declined 29 percent to $16.9 billion in 2019 since a $23.8-billion high in 2017, according to the Agriculture Department. Though China has committed to increasing its agricultural purchases, the phase one agreement will not remove the 25 percent tariff on U.S. soy products, a top concern for soybean farmers.

“It has taken decades to develop these relationships [in China],” said Daryl Nelson, a farmer from Greenfield, Iowa who grows soybeans with his son. “It’s a market that now we’re fearful will go to Brazil. It’s questionable if we’ll ever regain that.”

The decline and ongoing trade war have particularly hurt Louisiana due to the state’s status as an export market. Louisiana’s farmers have received $180 million in federal aid to compensate for losses, 75 percent of which went to soybean growers. Louisiana’s soybean farm value is $800 million, making it the state’s second major agriculture product behind sugarcane.

“Hopefully we get back to the business of old,” said Kyle McCann, assistant to the president at the Louisiana Farm Bureau. “When your No. 1 leaves, we [Louisiana] are impacted a little disproportionately as an export market.”

China historically bought almost 60 percent of Louisiana’s soybeans, according to The Advocate. The nation placed a tariff on American soy products in 2018 after Pres. Trump levied tariffs on Chinese steel earlier in the year. In the subsequent weeks, soybean prices dropped below $9 per bushel before reaching a low point ($7.80 per bushel) in May 2019.

“When farmers put soybeans in the ground in spring 2019, most everyone knew they were planting at a loss,” Dolch said. “There was just hope an agreement could be reached.”

To offset the high price of tariffs, Chinese buyers have sought alternative soybean sources, most notably Brazil. Increased Chinese demand for the South American nation’s soy products has contributed to the deforestation of the Amazon, drawing ire from environmentalists and American political leaders, including Democratic presidential hopeful Sen. Amy Klobuchar of Minnesota.

“The significant financial harm done to soybean farmers will not be undone with the signature of a phase-one trade agreement,” Iowa Soybean Association President Tim Bardole said in a December news release. “The impact of nearly 18 months of lost sales to a country that consumes one-third of U.S. soybean production will not be made up anytime soon.”

It will take until at least 2027 to rebuild the U.S. global agricultural market share, according to Dolch. U.S. farmers have sought emerging markets in Japan, India, Pakistan and the European Union as exports to China have declined.

It is uncertain whether U.S. soybean producers will be able to rekindle the close relations formed with Chinese buyers. China is the world’s largest farm produce importer, importing roughly $125 billion in 2017. Farmers fear the nation will be unwilling to cut imports from its new agriculture partners to meet the trade deal’s demands.

Chinese demand is another concern. African swine fever decimated the nation’s pig population. American soy is the top feed ingredient for Chinese swine.

China has built an import market for agricultural goods since the 1960s, McCann said. Market promotion and a higher standard of living led to an increased demand for American soy in the early 21st century. China’s import system requires a reliable soy provider, a role the U.S. played until the trade war.

“The agreement is a big positive, but so much depends on the other half of the world’s production of soybeans,” McCann said.

The phase-one agreement will bring long-desired structural changes to agricultural trade. China has agreed to reform its approval process for U.S. biotechnology. Massive delays of up to six years in the approval process have cost the industry billions, according to CNBC.

Beijing has yet to confirm figures announced by U.S. Trade Representative Robert Lighthizer and challenging phase-two negotiations could jeopardize earlier success. The next round of deals will cover long-standing issues such as the protection of American intellectual property and the Chinese subsidization of select industries.

“It’s kind of a ‘wait-and-see’ attitude amongst soybean farmers right now,” said Nelson, the Iowa farmer.

Democratic presidential candidates on the campaign trail in Iowa have used the trade war to criticize Pres. Trump and to make an appeal to the nation’s farmers.

“I would undo the tariffs and do everything I can to make things right with farmers,” Andrew Yang said earlier this month at an event in Perry, Iowa near Des Moines. “I am on the side of producers. I would be furious if I were a farmer and had no control of prices and couldn’t take my goods to market.”

Candidates hope to capitalize on expected weaker support among farmers and rural communities for Pres. Trump after the agricultural community bore the brunt of the president’s trade war.

“This president has permanently hurt farmers,” Sen. Cory Booker, Democrat of New Jersey, said about the announced trade deal. “Many of these people who bought soybeans from us have found other markets. This is an outrageous affront to our farmers who are already struggling and need our help.”

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