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Farmers optimistic of trade war truce ... eventually

By Holly Shively • Dec 10, 2018 at 4:00 PM

The trade war between China and the U.S. has played out at international levels all year, but the effects are being felt much closer to home.

This year prices for soybeans have fallen about 10 percent since May and part of the reason is placed on China’s decision to drastically cut back on the amount it buys from the U.S.

That leads directly to the pocket-books of local farmers and agriculture businesses. And news this week caused prices — and optimism — to seesaw that the dispute is going to be resolved anytime soon.

“What I’ve heard from farmers is they say they’ll believe (an end to the tariff war) when they see it,” said Roland Brubaker, plant manager of the Brookville Brubaker Grain. “They’re not convinced it’s all said and done yet…Obviously prices have responded a little bit, not a lot.”

Soybean prices started to improve early in the week as the market responded to news of a cease fire between President Donald Trump and Chinese President Xi Jinping. The value that dipped as low as $8.14 in mid September was nearly $1 more at $9.10 Thursday.

The potential trade truce includes a U.S. plan to halt tariff increases previously planned for the new year and a commitment from China to purchase “a very substantial amount of American agriculture, energy and industrial goods,” the White House said. Leaders will negotiate further interests over the next 90 days.

But area farmers and agriculture experts say the lack of details following the meeting is not translating to relief.

Then prices wobbled again Thursday after news that the chief financial officer of the Chinese telecom giant Huawei, Meng Wanzhou, was arrested Saturday in Canada on a warrant from the U.S. Little has been said publicly about the cause of the arrest, and Chinese officials have demanded Wanzhou be released.

The arrest is expected to make tense negotiations between the U.S. and China more complicated.

“I think there’s guarded anticipation because we know it can all fall apart,” said Darke County OSU Extension educator Sam Custer. “… It’s a high stress time. I think people are reevaluating where they are.”

Two Darke County farms recently decided to halt farming operations and liquidated their farm equipment. And agriculture lenders say there’s more land for sale right now than they can remember in recent history, Custer said. He expects farmers will continue to consider selling land, retiring a few years earlier than expected and looking for other opportunities to invest.

“There’s a lot of farmers out there who live real close to the line of making or not making it…anything like this can affect it,” said Darke County farmer Dean Thompson.

Farmers who couldn’t break even this year will feel the pinch next year, Thompson said. Though some have saved up enough to withstand the low prices the market is currently bringing, others will be left trying to make enough money in 2019 to pay off next year’s operating expenses as well as their losses this year.

Some farmers who contracted ahead of time were able to get $10 a bushel for their beans, but as they consider contracting for next year, they’re faced with current prices, which in Darke County were around $8.60 earlier this week. Farmers need about $9.25 per bushel to break even, Custer said. Others who refused to sell at the market value decided to store.

“There were more people putting (beans) in storage than typical, for sure,” Brubaker said.

Many farmers have started selling their stored crop at the slightly increased prices, showing that they’re still worried the prices will drop again, Brubaker said.

“I think it will take a little time for people to get their confidence back, for the farmers to get their confidence back. It will probably have a year or two effect,” he said.

Nonetheless, as soon as a significant plan for China to resume buying agriculture from the United States surfaces, Custer said prices will respond significantly. But as prices start to rise, farmers across the country will sell their crop. The massive supply hitting all at once will in turn drop the price back down for a period of time.

“There’s a long tail to having an open oversupply of beans,” Cornely said. “All of the soybeans the farmers stored up because they didn’t want to sell at low price, you can’t just unload those overnight. It takes a while for the markets to readjust, and so I expect next year you’ll see a lot fewer soybeans planted.”

Yet Thompson ordered the normal soybean seed count for planting as usual. He said he’s optimistic the market will work itself out and demand for beans will grow.

“They make a lot of things out of beans. I just can’t help but think that somebody somewhere is going need these beans,” he said. “Whether it’s China or somebody else, beans are becoming very useful for many many things and then they keep developing new things all the time.”

Before the trade war, China was buying nearly one in every three rows of soybeans. During the previous months, China cut soybean imports from the United Sates by 97 percent and turned to Brazil and other markets for supply.

“We are supply and demand driven and if they’ve met their supply from another source, they’re probably not going to demand as much from us, so I would say we’re not going to get that full rebound we would hope for,” Custer said.

But sixth generation northern Greene County farmer and former high school agriculture educator Craig Corry said the dropping prices this year aren’t new. Record yields during the 2018 harvest drove prices down, and no one can really determine how much of an impact the tariffs had, he said.

“China would easily turn to another country if they’re not buying from the U.S. … but that would mean that there may be other countries that are coming to the United States,” Corry said.

One weather change in either Brazil or the United States could rapidly turn the market around, he said.

“(Farmers) pay the most attention to the things that they have in their control, so that is to produce a good crop and really try not to worry about the factors that are out of our control,” he said.

Both Corry and Thompson said despite the downturn in agriculture and their preference for free trade, they support Trump in efforts to straighten issues with China.

The tariffs on American agricultural goods like soybeans and pork were a response to Trump’s initial 25 percent tariff on $34 billion worth of Chinese goods. Trump said the tariffs were an effort to halt China’s alleged theft of U.S. technology and coercion of American companies to surrender their trade secrets in exchange for access to the Chinese market, as well as cut the trade imbalance between the countries.

The timing of the trade war added to farmer concern as the legislature missed an initial deadline to pass a farm bill. Ohio Democratic Senator Sherrod Brown said the United States House and Senate plan to pass the bill in the next couple of weeks to “provide Ohio farmers with the certainty they deserve.”

The bill will tell farmers the rules of the game, Cornelly said, helping them make decisions as they plan what to plant how to run operations next year.

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©2018 the Dayton Daily News (Dayton, Ohio)

Visit the Dayton Daily News (Dayton, Ohio) at www.daytondailynews.com

Distributed by Tribune Content Agency, LLC.

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