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home : most recent : economy December 15, 2018

12/1/2018 12:02:00 PM
Hancock County feeling tremors over tariffs on soybeans
Some experts predict more farmers will abandon crop rotation and plant a consecutive season of corn instead of switching to soybeans. Staff photo
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Some experts predict more farmers will abandon crop rotation and plant a consecutive season of corn instead of switching to soybeans. Staff photo
What is a tariff?

A tariff, such as those imposed by the Trump Administration and its trading partners-turned-adversaries is a tax imposed on imported goods and services.

Tariffs restrict imports by increasing the price of goods and services purchased from overseas, making them less attractive to consumers. A specific tariff is levied as a fixed fee based on the type of item.

Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition. By making foreign-produced goods more expensive, tariffs can make domestic-produced ones more attractive. Tariffs can also be used as an extension of foreign policy: Imposing tariffs on a trading partner’s main exports is a way to exert economic leverage.

Source: Investopedia

By the numbers

Hancock County soybean production estimates

2017 — 3.33 million bushels on 56,900 acres

2016 — 4.17 million bushels on 74,000 acres

2015 — 3.47 million bushels on 72,300 acres

2014 — 4.02 million bushels on 68,300 acres

2013 — 3.35 million bushels on 64,900 acres

Source: National Agricultural Statistics Service 

Ben Middlekamp, Daily Reporter Reporter

HANCOCK COUNTY — As harvest season comes to a close, Hancock County farmer Jon Sparks is doing something a little unusual: He is storing more of his soybean harvest, leaving part of the valuable crop in bins until the market improves.

An uneasy market looming from a trade war with China, coupled with a surplus of beans, have caused farmers like Sparks to scramble to find space to store part of this year’s crop. It has also shifted the crop forecast for 2019.

Sparks, who farms about 1,500 acres of corn and soybeans in the southeastern part of the county with his brother-in-law and nephew, said many growers are waiting longer to sell a large harvest of beans because the country’s biggest traditional export market, China, is closing for now, causing prices to drop.

America’s ongoing feud with China stems from a 25 percent retaliatory tariff Beijing imposed during summer on U.S. agricultural goods — with soybeans as the top affected export product — after President Donald Trump slapped tariffs on Chinese imports, including tech products.

The Chinese tariffs came at a pivotal time. Farmers across the country brought in large amounts of soybeans this year — a record 4.6 bushels, according to the United States Department of Agriculture. In Hancock County 60,000 to 70,000 acres of farmland are typically planted in soybeans. About a third of U.S. soybeans is typically exported to China, but lower prices caused by the tariffs have virtually shut out the market for soybeans grown here.

Ronnie Mohr, who helps run a three-generation farm north of Greenfield, typically stores his seed beans during harvest and waits until companies collect them to process. Earlier this year, before the tariffs went into effect, Mohr said he sold some soybean seed at about $10 a bushel. But then, prices dropped by 20 percent to about $8 shortly after that, causing the 4,500-acre, two-family farm to lose some profit.

Now, with China out of the U.S. agriculture export market — Brazil has become its key trading partner for soybeans — U.S. farmers have to find alternative ways to export soybeans. For those who can’t sell it, many have decided to hang on to it.

“We need our trade partners in agriculture. We really do,” Mohr said. “They’re so critical to us.”

Most Hancock County farmers send their crops to the Bunge North America refinery and elevator in Morristown, Sparks said. Soren Schroder, the chief executive officer of Bunge Ltd., the world’s largest soybean processor, told Bloomberg News last month that he’s heard farmers and commercial companies across the country have put corn and soybeans in tool sheds and caves. Others have put crops in bags, hoping the market will be sorted out.

While the lower costs can be attributed partly to the tariff, some of the decline is due to the larger supply of soybeans, said Sparks, who’s also the director for District 6 of the Indiana Farm Bureau, which includes Hancock County. Sparks said soybean production has gradually increased over the past 10 to 15 years.

Since 2013, Hancock County farmers have averaged a harvest of about 3.7 million bushels of soybeans a year, according to National Agricultural Statistics Service estimates.

And with a large supply with no surefire place to go, Sparks said, the tariff could change the future of the market. Hancock County now has about a 50-50 split on soybean and corn production, he said. That might change.

“The biggest consequences may come a year or two from now if there isn’t some type of quick, reasonable resolution to this,” said Sparks, a Hancock County farmer and former county Farm Bureau president.

The USDA recently estimated the amount of soybeans stored in October is up about 45 percent from the same time last year. Some producers are having to find different ports, such as along the Gulf of Mexico and on the East Coast, to export grain to different countries to replace the trade with China. Beans would typically be shipped to the West Coast and then exported to China from ports in the Pacific Northwest.

Wally Tyner, a professor of agriculture economics with Purdue University, said the United States and China are estimated to each lose about $2.6 billion a year due to the recent tariffs.

“This is a lose-lose type of proposition,” Tyner said. “The winner is Brazil.”

Brazil, which surpassed the U.S. in soybean production for 2018 and is world’s largest soybean exporter, is set to gain $2.2 billion a year because of the trade war, Tyner said. The South American country has taken over the Chinese soybean market from the United States — a switch that could be in effect long-term.

China is investing about $520 million into Brazilian infrastructure to aid in their soybean production, building a port in the northeastern part of the country, according to Bloomberg News.

“When we’re harvesting, (Brazil is) planting. When we’re planting, they’re harvesting,” Mohr said. “We’re good competitors as long as the table’s set level. But the China thing gives them a gigantic advantage. When you know going right into it that you’ve got to be $2 lower per bushel, you just can’t do that.”

Next year, Sparks and Tyner said farmers could shift to planting more corn than soybeans. But if both crops then have too much supply, Sparks said that could lead to another small market.

Roy Ballard, Purdue Extension educator for Hancock County, said farmers typically rotate soybeans and corn. If they decide to grow corn again instead of soybeans and abandon the rotation, it could have adverse effects on pest control and nutritional and soil quality.

Mohr, however, said he thinks Hancock County farmers will still rotate their crops as usual.

“We say we’re in it for the long haul,” he said.

Sparks said as farmers are dealing with an unclear market this year and in years to come, it’s not any cheaper to maintain their businesses. Input prices on fertilizer and chemicals are up, and farm incomes have dropped in half since 2013, he said. The USDA’s Economic Research Service estimated that the 2018 net farm income will be 13 percent lower than the year prior.

“The agriculture economy is somewhat in a fragile state,” Sparks said.

The Trump administration is providing up to $12 billion in emergency relief funds for farmers through a USDA trade relief package to offset part of the impact of the tariffs by China. Soybean farmers can get checks for $1.65 per bushel, totaling $3.6 billion. Farmers had to apply for the one-time federal aid.

While the tariff has hurt the agriculture economy, Mohr said he believes Trump “did what needed to be done” in promising to redo U.S. trade agreements.

Sparks said he viewed U.S.-Chinese agricultural trade as a “bright spot” among other trade agreements.

All the uncertainty, however, presents a dilemma: Although they are wary of the tariffs, many farmers throughout the country — and in Hancock County — are still supportive of the Trump administration. The county overwhelmingly voted for Trump in the 2016 election. And in last month’s midterm election, two-thirds of Hancock County voters supported Greg Pence, brother of Vice President Mike Pence, for the 6th Congressional District seat in the House of Representatives.

Sparks said it’s difficult for some conservative farmers to speak out against the president on his trade decisions while still supporting the Republican Party.

Mohr, who calls himself “the most conservative Democrat,” said he is “confident with concern” about Trump’s ability to navigate the intricate import-export system.

But he suggested that patience will be limited: “I think if nothing’s done in the next six months,” he said, “you’re going to see a big change in attitude toward the Trump Administration from the ag segment.”

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Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR

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