Tariffs and talk of tariffs have already snipped 20 percent off of soybean farmer’s bottom lines, North Dakota Farmers Union President Mark Watne says, and he’s hoping that lawmakers will consider a fix to that problem in the upcoming Farm Bill, which is now headed into conference committee.
“It all depends on which days you pick,” Watne acknowledged, “but since this started, we are off about $2 a bushel (for soybeans). And it’s probably due to the rumors of a trade war and the rumors of loss of market and that some other country will fill those needs to China. Whether that all becomes true is hard to know ahead of time, but, if you’re a soybean farmer, you just took a 20 percent hit to the bottom line if you don’t have grain markets locked in ahead of time, or if you cannot hold it after harvest, or if prices don’t come back.”
The same general thing is happening to corn to Mexico and wheat to Canada, Watne said.
“It’s creating rumors that we may not have as many markets, and the marketplace is doing what it does best,” he said.
That would be, driving prices to the lowest possible price level for buyers.
Unfortunately, farmers have already been under stress from low market prices and less income, with one bad year after another. The 20 percent and 15 percent hits from tariffs and talk of tariffs is thus coming at a particularly bad time.
“If you remember back in the day when Jimmy Carter was president and there was an embargo to Russia,” Watne said. “He literally got crucified over it. To suggest here that you can do a trade war with China, our top buyer of soybeans, and then to not be able to negotiate out of NAFTA … well all I can say is, I hope he is right. I hope they are choosing wisely. Because we are probably going to lose a lot of farms over this before it’s over.”
The situation with ethanol waivers has not helped much either, Watne added.
“It has been a detriment to the demand, and we are sitting on ample supply,” he said.
The Farm Bill could offer the best chance for a fix to these troubles, Watne suggested.
He would like to see lawmakers consider increasing the reference prices up to the cost of production using the Price Loss Coverage program while the Farm Bill is in conference committee.
“We need a backstop at a level where we can survive at, assuming this trade war gets really messy and China holds out for a long time,” he said. “That’s a price where farmers can kind of offset the cost of the market responding to the trade war.”
The fix would really only work with PLC, Watne added.
“(ARC and crop insurance) are based on an average over a period of time,” he explained. “If we have a low period, it brings down the support level.”
He would like to see at least a 15 to 20 percent adjustment, tracking soybean, wheat and corn prices have lost.
“You could also look at some other logical number, like 10 percent over the cost of production,” he suggested.
Since it is a new idea, it’s unclear whether it could actually be addressed during the conference committee between the Senate and House on their competing versions of the Farm Bill, but the trade situation, at the least, does add a new wrinkle to what is already likely to be an intense discussion.
The U.S. Senate and House versions of the Farm Bill are fairly far apart on SNAP requirements, and those differences will have to be worked out in some fashion likely to pass both bodies of the legislature.
Meanwhile, Agriculture Secretary Sonny Perdue has said he’s working on a solution to protect farmers from retaliatory tariffs. Details of that effort, however, have been scant.
Perdue has been touring the West Coast, and hearing from farmers about the trade war. In Oregon, Perdue agreed that farmers need help, telling The Columbian, “As patriotic as American agriculture producers are, you can’t pay the bills with patriotism.”
However, he has offered no timing on any trade relief for farmers during that or subsequent interviews with the media.
North Dakota lawmakers, meanwhile, have been talking to trade officials about the situation.
Both Sen. Heidi Heitkamp and U.S. Representative Kevin Cramer met recently with U.S. Trade Representative Robert Lighthizer to discuss their concerns with and the status of trade negotiations.
Heitkamp said her meeting with Lighthizer was to convey concerns she heard from North Dakota farmers at listening sessions she held across the state, just after the United States imposed $34 billion in tariffs on Chinese goods. These were immediately met with retaliatory tariffs in the same amount on various U.S. goods, including soybeans and other agricultural products, and energy exports.
“As I’ve repeatedly told Ambassador Lighthizer, this trade war is misguided and damaging to North Dakota’s economy, which relies heavily on exporting the food, energy, and products we proudly produce for the world,” Heitkamp said. “We should be taking proactive steps to improve our trade agreements and build new markets – instead, the administration has tossed a wrench of uncertainty into the gears that keep our rural economy moving forward. I talk to farmers and ranchers nearly every day, and their top concern is resolving this trade war quickly in a way that protects their access to markets. I again brought these concerns to Ambassador Lighthizer, and I urged him take the concerns of North Dakota producers to heart while pursuing a more strategic way to boost U.S. exports.”
Cramer, meanwhile, said he agreed with administration efforts to fight long-standing trade issues that have hurt American farmers and businesses for decades, and said he would encourage members of Congress to rally behind Lighthizer and the administration.
“We talked a lot about China, but even more about NAFTA,” Cramer said. “I reiterated that there are a lot of North Dakota farmers very frustrated with Canada’s discrimination against their products as they cross the border. For example, we allow their wheat to cross the border quite openly but this openness is not reciprocated for our producers. I told him there are a lot of people pulling for the goals of the President, but they are also concerned and have some anxiety as it relates to their particular commodity.”
Cramer said Lighthizer assured him farmers won’t be forgotten.
“I stressed the importance of understanding that farms are owned and managed by families and their budgets are cyclical just like commodity prices are cyclical,” Cramer said.” Their product is seasonal and they simply can’t take a perishable product and put it in the bank for many years. Every day has an impact on the family farm, he understood and acknowledged that and I was encouraged.”
Cramer said Lighthizer told him that May was the highest in American history for the export of U.S. goods and services, totalling $215.3 billion. The figure was reported by the U.S. Census Bureau. Cramer said it reflects the Trump Administration’s commitment to pursue free and fair trade for American exporters.
Sen. John Hoeven’s most recent statement on trade related to a meeting in mid-June with President Donald Trump, in which the senator said he outlined the importance of ensuring that valuable export markets remain open and that American products do not face a competitive disadvantage due to retaliatory tariffs, such as those announced recently by China.
Hoeven said the president talked about his trade agenda in some detail during the meeting, as well as progress on negotiations to secure better, more fair trade deals for America.
“I will continue to work to ensure that we get the best deals possible for our farmers, ranchers and other industries. Our producers need positive results soon,” Hoeven said.
Hoeven added that improvements to trade agreements should ensure that farmers and ranchers are able to sell as much or more than they currently do.
Hoeven has more recently been in Russia, where he was part of a delegation that discussed security issues with Russian embassy teams and government officials.
“In Russia, we met with government officials to have frank discussions about the status of current relations between the U.S. and Russia. We made it clear at our meetings that we believe Russia interfered in our elections, which is unacceptable, and also that we oppose Russia’s intervention in Ukraine and Syria. Russia needs to address these issues in order for our relations to improve. We began a dialogue, and the next step is for our country’s leaders to meet in Helsinki on July 16,” Hoeven said.