It’s only August, but I can’t wait for September to get here for a number of reasons. First, September means the return of football season. Friday night lights, Saturday afternoon tailgates.
By September, we should begin to see some relief from Arkansas’ miserably muggy summer weather, and in this corner of the state, maybe the mosquitoes will ease up on us too.
The harvest will be underway, and our region’s row crop farmers will have a pretty good idea of where they stand in terms of yield and quality. But what our agricultural producers — who must borrow money to engage in a business fraught with risks over which they have no control — won’t know is where they will stand financially as a trade war rages around them.
Except for the lucky few who spent their summer on a desert island with no cell service, it’s safe to say virtually all us know by now President Donald Trump imposed tariffs on certain Chinese products, an action said to have been taken because China is alleged to have stolen U.S. intellectual property.
“Tariffs are the greatest!” the president said in a tweet.
Maybe Beijing agreed with the president because China imposed tariffs of its own on a number of U.S. products in retaliation. The Chinese list was calculated to hit hardest at where Mr. Trump has some of his strongest support, the farm belt. China, Trump said, “is doing a little number. They want to attack the farm belt because they know the farmers love me.”
Soybean prices were among the first casualties of the trade war, dropping precipitously as the rhetoric — and the tariffs — flew back and forth. Soybean prices dropped about $2 a bushel from about $10.60 in January to about $8.60 in July. I wasn’t a math major, but it seems that on an average yield of 50 bushels an acre, a $2 drop in the price of beans would cost a farmer $100 per acre.
A study performed by Purdue University agricultural economists predicted Chinese imports of U.S. soybeans could drop by as much of 71% because of tariffs imposed by the Chinese. Meanwhile, our government reported the U.S. Gross Domestic Product grew by more than 4% in the second quarter, with a big jump in soybean exports as sellers tried to beat the imposition of the tariffs.
While the retaliatory Chinese tariffs were placed on more than 500 American products, most of the attention from the media and from their readers and viewers focused on soybeans. In fact, the trade war suddenly made soybeans a hot commodity in policy circles. Data from Google Trends indicated that searches for “soybeans” in the United States were near an all-time high as the battle lines between us and them — Washington and Beijing — began forming.
If nothing else, this newfound attention on the soybean provided education to millions of Americans who likely had no idea that the “vegetable oil” they see on a food label or the tofu in their Asian dishes comes from soybeans, nor that 70% of U.S. soy production is used to feed animals, notably poultry.
Since the Chinese tariffs are calculated to hit us where it hurts, U.S. Secretary of Agriculture Sonny Perdue announced $12 billion in aid designed to soften the blow from Beijing. In unveiling the package, Perdue said the price of the program is in line with the administration’s projected $11 billion impact on U.S. agriculture.
There are three programs in the package:
• A market facilitation program, which will provide incremental payments to soybean, sorghum, corn, wheat, cotton and hog producers impacted by the tariffs;
• A food purchase and distribution program by which the government will buy rice, bean, fruits, nuts, beef, pork and milk for distribution to food banks and other nutrition programs; and
• A trade promotion program designed to develop new export markets for farm products.
Perdue said the details should be released by Labor Day, so farmers will hear how the program will operate while they’re right in the middle of harvest. Some obvious questions for which farmers will want the answers include how will the incremental payments be made, when will they be made and how will they be calculated.
China is the single largest importer of U.S. soybeans, and 96% of U.S. soybeans are grown in 18 states. One huge question is whether the United States will lose the Chinese market to South America forever. Europe has agreed to buy more U.S. soybeans, but they can’t begin to make up for the loss of U.S. exports to China. Will farmers’ financial losses ripple through the agri-related industries?
Columnist Marc Thiessen notes that of the 18 states, including Arkansas, where virtually all of the nation’s soybeans are grown, all but two voted for Mr. Trump in 2016. Two months after the administration announces the details of the $12 billion farm relief plan, the midterm elections come along.
One can’t help but wonder if the emergency relief money will be in farmers’ hands and thus circulating throughout the economies of the farm belt states by November. With the rules only being released in September, that might prove to be a bit of a stretch for the United States Department of Agriculture to start sending checks out. Even if the money doesn’t make its way into producers’ hands by fall, will voters in the farm belt still support Mr. Trump?
Are tariffs in fact “the greatest?” We’ll know soon.
Editor’s note: Paul Holmes is editor-at-large of Northeast Arkansas Talk Business & Politics. The opinions expressed are those of the author.