Prices, hope slump as trade impasse continues05/16/2019 | Soybean Exports, Policy, Soybean News, Ag Awareness, Economics
By Bethany Baratta, ISA senior writer
As Wayne Fredericks plants another year's crop of soybeans and corn, he’s thinking about the impact the trade dispute between the United States and China has on this crop.
“It’s tough,” said Fredericks, an Iowa Soybean Association (ISA) past president and current board member of the American Soybean Association. “It’s hurting pocketbooks pretty bad.”
Prices have bounced in the past week, but cash prices have largely been under the cost of production.
There was a hint of optimism that a resolution would be reached, but that diminished as the United States increased the tariffs on $200 billion in Chinese goods from 10 percent to 25 percent, hoping to pressure a resolution to the trade dispute. China retaliated this week by raising tariffs on $60 billion in U.S. goods, including beef, fruits and vegetables, and other agricultural products.
Since then, President Donald Trump threatened to impose a 25 percent tariff on the remaining $325 billion in annual imports from China if a quick resolution is not reached.
“We had a glimmer of hope last week as the two sides met, but they didn’t make much progress at all,” said Dave Walton, secretary on the ISA’s board of directors. “We’re back to that point where we’re sort of in limbo.”
That uncertainty is taking a toll, said ISA CEO Kirk Leeds.
“There was an underpinning of optimism that the president and his team would deliver a deal with China, but that sense of optimism has evaporated,” said Leeds. “The result has been lower prices, but more than that, the psychological and emotional toll it’s taking on farmers.”
Fredericks said he understands the tough stance the president is taking on China, but the ongoing dispute hurts.
“We’ve kind of been good soldiers, understanding that the U.S. needs to address the trade issues with China, but it’s drug out for a year now and it’s affected prices significantly,” Fredericks said while planting soybeans near Osage. “Right now, I don’t have any confidence that this thing is going to get over very fast. These markets are devastating, especially soybeans,” he said.
Soybean prices recently hit 11-year lows.
Depressed market prices and trade uncertainty come as some farmers get started planting their soybeans and corn in Iowa after wet weather delayed many from getting into their fields.
“Crop is going in the ground now, so we can’t make any adjustments to our planting. But we’re in a spot where it’s difficult to make a decision in planting, marketing and what we can plan on for the following year,” Walton said.
He’s still hopeful for a resolution, but much like the rest of the trade impasse, it’s unclear when or if that will occur.
“We’re looking at selling at below the cost of production. You take that along with other factors, that’s adding insult to injury for us,” Walton said.
A new reality
The U.S. Department of Agriculture made mention of a $20 million trade assistance package designed to provide farmers and ranchers compensation as a result of trade retaliations, but details are limited on how that could be facilitated.
Leeds said the assistance is only a bandage, it can’t fully compensate for the losses associated in the absence of a top market.
“Because of the president’s approach—right or wrong—the damage has been done to agriculture and soybeans have been at the tip of the spear of the Chinese in retaliation,” Leeds said.
He said a longer-term approach should be established, this includes taking a look at the farm program.
“The reality is that this could be a long-term challenge for Iowa farmers. Because of this, we should be looking at our farm program that we just got passed and ask if, in a world dominated by tariffs, counter-tariffs and trade distortions, it still makes sense? I think the answer is no,” Leeds said.
“So, we have to take a look at the new reality. What does that mean for farm programs and policy?”
Contact Bethany Baratta at email@example.com.
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