The politics of farming
Heading into the new year, farmers in our region face challenges from both weather and politics. A drought cut into yield during the 2018 growing season. On the political side, President Trump imposed a tariff on imports from China in July, prompting China to retaliate with a 25 percent tariff on soybean imports. U.S. soybean prices declined by roughly $2 a bushel since March. On top of that, Congress delayed passing a new farm bill by its September deadline, finally reaching an agreement as the year drew to a close.
In mid-November, Brooks Hurst had nearly finished harvesting 6,000 acres of soybeans on his family farm near Tarkio, Mo. However, he had yet to sell any beans from the 2018 crop.
“We watch where every penny goes, and we’ve made long-term investments in on-farm storage, so we have more options in marketing the crop,” said Hurst, president of the Missouri Soybean Association and member of the American Soybean Association board. He farms with his father, Kevin; his grandfather, Charlie; his uncles, Blake and Brooks; and his two younger brothers, Dallas and Taylor.
Low market prices are mostly to blame for the Hursts’ hesitation to sell new-crop soybeans. In July, the Trump administration imposed 25 percent tariffs on Chinese products such as steel and aluminum. China responded by placing duties on U.S. imports, mostly agricultural products, with soybeans most impacted. Soybean prices have declined by approximately 20 percent since the tariffs went into effect.
The ability to store soybeans helped to insulate the Hursts from this decrease, but others may not be so fortunate.
“Our association has placed a high priority on developing our international markets and export relationships for many years,” Hurst said. “Our farmers are counting on having access to these markets and the demand they create for U.S. soybeans. What we’re seeing now is a direct hit to farmers and rural communities.”
Missouri farmers raised an average of 247 million soybeans annually over the past three years, according to the University of Missouri Extension Service’s Commercial Agriculture Program. Typically, more than half of Missouri’s annual soybean crop is exported, with nearly one in every three rows of soybeans destined for China.
Chinese citizens are demanding more pork as their economy develops, and China feeds beans to an increasing number of hogs. The Chinese population also consumes an abundance of soy cooking oil.
MU estimated that a $2-per-bushel decrease in soybean prices costs Missouri farmers nearly half a billion dollars, which means $212 million in lost earnings for workers and business owners and 3,000 fewer jobs statewide.
The American Soybean Association released this statement in late September: “Some trade analysts say it will be impossible for China to find enough soybeans and other protein feeds from other sources, and that China will continue to depend on the U.S. for a significant amount of its imports. But even if the U.S. keeps half of its soybean market in China, the value of exports due to lower prices will fall to an estimated $5.6 billion from the $14 billion sold in 2017. The outlook is for continued low prices and declining U.S. soybean production for years to come.”
MFA handling fewer beans
Hurst wouldn’t be surprised if farmers shift to planting more corn in 2019. Eric Williams, manager of grain trading for MFA Incorporated, agrees.
“The tariff will skew how we plant,” Williams said. “If I were a farmer, I’d plant more corn.”
In the midst of the 2018 harvest in November, Williams said MFA was handling fewer soybeans than usual.
“We’re seeing beans come across our scales, but not in the volume that other states are seeing, maybe due to the drought in parts of our trade area,” Williams said. “Also, some farmers are holding more beans in their own storage than in 2017 and are selling more corn now since corn prices haven’t been as affected by the tariff.”
Still, Williams predicts the 2018 U.S. soybean crop will be huge, on top of a large carryover from the 2017 crop. Large carryovers can depress market prices. However, Williams said MFA’s Grain Division positions itself to withstand different dynamics in the market every year.
Why a tariff?
As a founding partner with Global AgriTrends, Brett Stuart analyzes global and trading trends. He explains why the U.S. imposed tariffs on China.
“China has used many different means to keep U.S. products out, including non-scientific restrictions on U.S. beef, pork and poultry as well as feedstuffs,” Stuart said. “The current China duties retaliate against the Trump administration’s efforts to improve market access for U.S. farmers. Whether it succeeds is yet to be seen. But the reality is that outside of soybeans, China has never really opened to U.S. agriculture.”
Now, Stuart adds, Chinese officials have implemented an embargo of sorts, not allowing some U.S. soybeans in even if importers pay the duty. He warns that the trade war could be prolonged.
“The administration’s demands are big, broad and vague: intellectual property theft, market access, dumping, subsidizing,” Stuart said. “Those are difficult to fix in China. Chinese duties could last through 2019.”
Help comes from subsidies
With $27 billion of American agricultural exports affected, the U.S. announced it will subsidize American farmers for up to $12 billion through the Market Facilitation Program to offset losses resulting from China’s retaliatory tariff.
“Soybean farmers were scheduled to receive half of the promised amount—82.5 cents per bushel—on Dec. 3,” Williams explained. “If the tariffs go away, the federal government doesn’t have to pay the rest of the subsidies.”
While grain handlers like MFA can easily report the volume of soybeans they’re holding, USDA would have to send personnel to farms that store their own beans, Williams added.
“I don’t know how USDA will do it all,” he said. “Farmers don’t want a handout—they’d rather earn their profits in the marketplace. I don’t have a solution, but everyone will be happy when we can get away from tariffs.”
The deadline for applying for USDA’s Market Facilitation Program is Jan. 15, 2019. The program will provide payments to soybean, corn, cotton, dairy, hog and wheat producers based on 2018 production. Contact your local Farm Service Agency, or visit www.farmers.gov/manage/mfp.
USMCA cheers up corn and soy growers
September brought better news when the North American Free Trade Agreement (NAFTA) was replaced with the slightly revised U.S., Mexico and Canada Agreement (USMCA), allowing trade between the three nations to remain duty-free. President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto signed the USMCA Nov. 30 at the G-20 Summit in Buenos Aires.
“We appreciate the stability this stands to bring soybean producers in the North American markets,” Hurst says. “U.S. soy exports to Canada and Mexico were almost $3 billion in 2017, with Mexico the No. 2 export market for U.S. soybeans, after China.”
Corn growers were pleased as well. In 2017, the U.S. exported more than $3 billion of corn and corn products to Mexico and Canada, according to the National Corn Growers Association. Mexico is the top importer of U.S. corn.
No one can predict the outcome of the president’s bold trade strategy, but it’s certain to affect agreements with other nations.
“With USMCA and the Korean-U.S. trade agreement mostly complete, the focus is on China,” Stuart said. “However, the administration intends to begin free trade talks with Japan, the EU and Britain. Those markets hold key benefits for U.S. agriculture.”
Prices may rally
MFA’s Williams is hopeful for positive news in the soybean market, quoting a Nov. 30 St. Louis daily cash price for soybeans of $8.72, while March 2019 futures were priced at $9.05.
“Some farmers will hold onto a high percentage of their beans,” he said, “and an upside price rally is possible in 2019.”
Williams also reports that the U.S. continues to export soybeans to China, although at a slower pace. Some worry that Brazil will step in and capture the U.S. market.
“Brazil can’t supply all of China’s needs,” Williams said. “Besides, Brazil is selling beans for about 20 percent higher than before the tariff. China’s going to pay more, no matter where they source it. China accounts for roughly 60 percent of world demand for soybeans, and eventually they’ve got to come to North or South America to get what they need.”
When will we see a new farm bill?
The Sept. 30, 2018, deadline for a new farm bill came and went without resolve, even though Congress had been working on new legislation throughout the year. That’s not surprising to those in agricultural circles, said Gary Marshall, CEO of the Missouri Corn Growers Association.
In late November, however, Farm Bill negotiators said they had reached an “agreement in principle,” offering hope of breaking the impasse and sending legislation to President Trump before the end of the year. Details of the deal had not been released as of press time.
At issue has been a provision in the new draft of the bill that would impose stricter work requirements for recipients of food stamps. The Republican-led House of Representatives passed the $867 billion bill in June with the tougher requirements, over the objections of Democrats. The Senate, meanwhile, passed its own bipartisan version that excluded the requirements.
“The farm bill is intended to manage risk and provide certainty by offering farmers a safety net in times of hardship and ensuring the United States remains the safest and most effective food source in the world,” said Missouri Rep. Vicky Hartzler, a Republican, who in July was named to serve on the Conference Committee formed to resolve differences between the House and Senate versions of the bill.
The newly re-elected congresswoman has a personal stake in the bill. She, her husband, Lowell, and their daughter, Tiffany, farm near Harrisonville, Mo.
“We, like all farmers, are feeling the effects of lower prices,” she said, adding that she hopes for a resolution on trade with China soon.
For an outlook on the new farm bill, we talked with Hartzler, Marshall and Chuck Conners, president of National Council of Farmer Cooperatives (NCFC). MFA Incorporated is a farmer-owned cooperative and a member of NCFC.
Conners predicts that the final farm bill will reflect strong support for crop insurance.
“The farm bill isn’t the magic bullet when it comes to low prices affecting agriculture,” Conners said. “It can provide a safety net to keep losses from becoming even more catastrophic.”
Commodity support programs and crop insurance are the most important elements of the safety net, he added.
Marshall agrees: “Crop insurance is our only real protection from drought or low prices.”
Mike Smith, principal agent for MFA Crop Insurance, assures farmers that even if the farm bill is further delayed, it won’t affect the crop insurance program for 2018.
Conners, Marshall and Hartzler all want to see provisions to increase exports. Since NCFC represents grain-marketing cooperatives such as MFA, Conners said expanded access to export markets is a high priority.
Corn and soybean growers associations also have skin in the game. Both devote a share of check-off funds collected from grower-members to foreign market development.
In our farm bill discussions, we found a consensus of support for conservation funding.
“Our members use a lot of conservation dollars,” Marshall said. “The state of Missouri matches federal dollars to help us put crop protection where it’s supposed to go.”
Conners thinks we’ll see a continued trend towards consolidating working lands programs.
“Overall funding will likely stay the same or possibly increase,” he said.
Hartzler said she would like to roll the Conservation Stewardship Program (CSP) authority into the Environmental Quality Incentives Program (EQIP) to ensure decisions are made closer to ranchers and landowners.
The biggest bone of contention between the House and Senate versions of the bill is the Supplemental Nutritional Assistance Program (SNAP), formerly known as food stamps. The program benefits 40 million Americans and makes up 80 percent of farm bill funding. The House bill requires SNAP recipients to work or get job training; the Senate version doesn’t include those stipulations. The final legislation will likely not include the stricter requirements.
“Any action on nutrition programs should preserve the broad-based coalition that has ensured strong support for farm programs in the past,” Conners said. “We will probably see some changes to SNAP, but the end result will be much closer to the Senate’s legislation than to the House’s provisions on work requirements.”
Research, the internet and labor
Additional farm bill priorities, according to Hartzler, are continued research and development funding, along with improving access to high-speed Internet.
“The House version of the farm bill includes my provision to set minimum speeds and expand access to Rural Utility Services loans and loan guarantees,” she said.
Access to labor is a challenge for many farmers. NCFC calls for a guest worker program and other reforms, but Conners admits the outlook remains uncertain with the contentious immigration issue.
As of press time on Nov. 30, the farm bill’s language was yet to be finalized. The latest debate among lawmakers focused on forestry provisions The latest debate among lawmakers focused on forestry provisions following the deadly wildfires in California. Once voted on, the bill goes to the president for signing.
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