White House working on farmer aid to ease impact of retaliatory tariffs

by Kim Souza (ksouza@talkbusiness.net) 310 views 

In response to the latest round of retaliatory tariffs by China on U.S. goods, President Donald Trump said his administration is working on an aid package for farmers. The package is expected to total roughly $15 billion, according to a tweet by the President on Friday (May 10).

“Arkansas farmers could benefit from this program, but more than anything, they need for markets like China to be open without tariffs,” said Matt King, director of government relations for Arkansas Farm Bureau.

China retaliated with tariffs of $60 billion on U.S. products in the latest tariff round between the two nations. The move came after Trump raised tariff rates on more than $200 billion worth of Chinese goods from 10% to 25%. He also slapped a 25% duty on another $325 billion of products routinely imported from China. The U.S. tariffs also went into effect on Friday.

The Trump Administration said it plans to use proceeds from the new tariffs to procure products from U.S. farmers and ship those products to countries in need over the next 18 months. The U.S. Department of Agriculture (USDA) is working to carry out that plan. Tariff opponents argue there are no proceeds to the U.S. Treasury from tariffs, with the higher rates being paid primarily by consumers.

King said the previous program did help some farmers who suffered from lost exports but the impact this time will be greater. He said 90% of soybeans grown in Arkansas are exported. He said the state lacks crushing capacity to make soybean meal and other products and can only handle 10% of the crop grown in the state.

King said 60% of soybeans went to China before the tariffs. He said China now buys more soybeans from South America and that has opened markets like the European Union to Arkansas farmers since South America can no longer fill their orders. But there is nothing to make up for the entire loss given the size of China’s demand.

He said any federal aid for soybean farmers would be welcome, but there is nothing to replace the entire loss of Chinese exports. He said farmers have stored soybeans in bins from last year because the prices were too low and demand was tepid outside of China. Adding to the plight, he said the heavy spring rains have kept farmers out of their fields and postponed planting. He said that will also likely reduce overall yields when the crop is harvested.

“Prior to the tariffs, we were selling lots of soybeans in a short period of time keeping prices higher. Now we are selling less soybeans over a longer marketing period, which brings prices down and storing the product raises the cost for farmers,” King said.

‘GRIMMER BY THE DAY’
Officials with the American Soybean Association (ASA) said they appreciate Trump’s effort to hold China to fair trade practices and respect intellectual property, but said there are better ways to do that other than through trade wars. July soybean futures on Monday fell to $7.92 per bushel, the lowest contract in 10 years.

“We’ve been understanding during this negotiation process, but we cannot withstand another year in which our most important foreign market continues to slip away and soybean prices are 20 to 25 percent, or even more, below pre-tariff levels,” John Heisdorffer, ASA chairman and Keota, Iowa, soy grower said in this association statement. “The sentiment out in farm country is getting grimmer by the day. Our patience is waning, our finances are suffering, and the stress from months of living with the consequences of these tariffs is mounting.”

Davie Stephens, soy grower from Clinton, Ky., and ASA president, said another impact is in rebuilding the trade relationship when the trade war ends.

“The soybean market in China took us more than 40 years to build, and as this confrontation continues, it will become increasingly difficult to recover. With depressed prices and unsold stocks expected to double by the 2019 harvest, soybean farmers are not willing to be collateral damage in an endless tariff war,” said Stephens.

OTHER FARM PRODUCT IMPACTS
Stephens said poultry and rice also have long been negatively impacted by regulations that have kept their products out of China. He said while Farm Bureau welcomes any federal aid, the best solution to help farmers long-term is free trade with China and other nations such as Mexico and Canada.

The pork industry is one of those hit hardest by the tariffs. Pork exports to China and Hong Kong declined 29% last year, according to the U.S. Meat Export Federation. Through March, U.S. pork exports to China and Hong Kong fell 20% below last year’s volume.

“U.S. pork has suffered from a disproportionate share of retaliation due to trade disputes with Mexico and China. This retaliation turned last year — which analysts had forecast to be profitable — into a very unprofitable time for U.S. pork producers,” said David Herring, president of the National Pork Producers Council.

He said the industry welcomes the federal assistance to help mitigate the impact from the ongoing trade tensions with China and Mexico.

In August, the USDA made available $12 billion for farmers and ranchers impacted by retaliation to the Trump administration’s tariffs on Chinese, Mexican and Canadian steel and aluminum. USDA said by March nearly $8 billion from that program has been dispersed. The latest aid package is expected to be modeled after the former program that looks at each commodity separately and calculates the loss relating to tariffs based on prior year export stats.

The American Farm Bureau found hog producers in 2018 were believed to have suffered the greatest impact at $8 per head. Corn producers were found to have been impacted by 1 cent per bushel. Soybean farmers received a facilitation payment of 68 cents per bushel based on the impact of those 2018 tariffs.

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