The long-standing trade war with China seemingly has no end in sight and now Arkansas farmers are being advised to find new markets. They are also being told that the recently announced Market Facilitation Program that is supposed to subsidize those losses may not be permanent.
Scott Stiles, extension economist for the University of Arkansas System Division of Agriculture, spoke at the Lonoke Co. Extension Center earlier this week. Stiles explained that 2018 began with optimism about soybean prices, but a record crop in Brazil, compounded by China’s 25% tariffs on U.S. products, led to large ending stocks of soybeans and a drop in prices. He warned that the trade relationship with China may take years to repair.
“U.S. carryover is starting to build. You are witnessing something historic here,” Stiles said. “The U.S. Department of Agriculture estimates just over a billion bushels. Ultimately, we could see that number go to 1.1 billion, maybe as soon as the August report comes in.”
With the advent of tariffs, soybean sales to China were down 508 million bushels; sorghum was down 155 million bushels and cotton was down 901,000 bales.
Outbreaks of African swine fever, now reported in China, Cambodia, Vietnam and Europe, may reshape the world’s soybean markets even more than tariffs, however. The disease is incurable and has an almost 100% mortality rate. Stiles said one projection forecasts some 200 million pigs to be culled due to the disease.
“Culling is expected to reduce Chinese soybean demand up to 22 million tons, or 21%,” he said. “That could have more of an impact on soybean demand than the tariffs themselves.”
The bottom line, Stiles said, is that farmers have to ask themselves, “what can we do to diversify and be less reliant on China?” And it’s a long-haul game, he added. “Some argue it may take many years to restore trade to China.”
Monday (July 29) was the first day of the signup period for Market Facilitation Program payments and while he said the 2018 MFP payments filled gaps left by Agricultural Risk Coverage and Price Loss Coverage payments under the 2014 Farm Bill, Stiles urged caution.
“Don’t expect MFP to become a permanent part of your cash flow,” he said.
U.S. Rep. Rick Crawford R-Jonesboro, also made a presentation on Monday.
Crawford underscored Stiles’ points, saying MFP “is a Band-aid.” He said his office had received several calls about MFP, especially over the differences in county rates. However, he said that this year was “more fair than it was administered last year.”
The congressman also urged farmers to be looking at ways to increase domestic consumption of commodities.
“We need to diversify our portfolio, our crop mix. Relying on the Chinese marketplace to do business, you do at your own peril,” Crawford said, adding that other markets in Asia, such as Malaysia, India, Singapore and Vietnam were starting to look good.