Trade war threatens local farmers

Robert Connelly, GateHouse Media Illinois
Soybeans are less than two months away from harvest for local farmers. The crop has been hit with tariffs as the United States undergoes a trade war that farmers hope will be resolved by this fall.

About this project — Newspapers in GateHouse's Western Illinois Division collaborated on this project looking at the impact of the trade war on farmers in west-central Illinois. The project gathers information and reaction from agriculture experts, farmers and politicians as China and other countries apply tariffs to U.S. exports such as soybeans and pork. The project includes Fulton, Henderson, Henry, Knox, Livingston, McDonough, Mercer, Stark, Tazewell and Warren counties.

China's trade tariff on soybeans has lowered market values and has west-central farmers concerned.

Knox County Farm Bureau president Grant Strom said soybean prices have fallen 20 to 25 percent since word began to spread in late May, around Memorial Day, about impending tariffs.

"A big chunk of our soybeans get exported and a big chunk of those get exported to China so any talk of tariffs on China were a concern," he said.

While Strom, who farms in Dahinda, and other farmers say there are trade issues with China, Strom said "We don’t want to be collateral damage at the end."

Soybeans vital crop to Illinois

Illinois will usually rank number one or two in soybean production, Strom said.

It continues to be an important crop in west-central Illinois. Of the 10 counties considered for this story, soybean production in 2017 reached 80.9 million bushels. Of those counties, Livingston had the highest production, at 16.8 million bushels, followed by Henry County (10.4 million bushels) and Knox County (8.3 million bushels) for 2017.

And just as the crop is essential to the area, so is the potential harm from Chinese tariffs. A study by University of Illinois and Ohio State in April projected that a 25 percent tariff (China's tariff on U.S. soybeans is 25 percent) would result in "a significant deterioration in cash flow."

The resulting 20-percent farmland price decline would result in over a $500,000 decline in the farm's net worth by 2021, the study found.

Strom hopes the trade issues are resolved by December so those projected losses can be avoided.

"If something is not put together to help this market stabilize, it’s going to get pretty tough. I know as a farmer a lot of bills are coming due in December … a lot of the loans you’ll use to pay that stuff back will be due anywhere between December and March," he said. "It’s going to be starting to become pretty critical when we get into the late months of 2018 and early months of 2019."

While farmers can use grain bins or other storage facilities to set aside grain to wait for prices to rebound, the price of grain bins has also gone up thanks to the steel tariffs. Strom called that a "double whammy."

President reveals aid package

Tariffs, or taxes imposed on imported goods, are sometimes referred to as duties or levies and are collected by customs and border protection agents at ports of entry across the country with proceeds going to the U.S. Treasury.

On July 6, Washington imposed 25 percent tariffs on $34 billion of imports from China after imposing tariffs on steel and aluminum. China, and other countries retaliated with tariffs affecting American soybeans and pork.

Last week, President Donald Trump directed the U.S. Department of Agriculture to assist farmers hurt by tariffs by authorizing up to $12 billion in aid.

"These programs will assist agricultural producers to meet the costs of disrupted markets," U.S. Secretary of Agriculture Sonny Perdue said in a news release.

As that news trickled out, Strom had mixed reactions.

"First reaction is that I appreciate the president is understanding the dynamics of the market right now and how tariffs have really taken a bite out of the commodities with pork and soybeans," he said. "We would much rather make our money through trade and normal market channels."

"Trade, not aid," has become a slogan of those wanting to see an end to the trade war in recent days.

Farmers want new trade channels

Strom said he understands that the packages highlighted by the USDA are traditional programs, such as disaster-type assistance or when the government purchases extra food for its own programs.

But Strom said he and Illinois farmers would like to see funds set aside for other export markets "to help promote new markets, not so much send direct payments to the farmers, and have places we can continue to sell product year after year."

Those new markets could potentially include the announced trade deal between the United States and the European Union a few days ago, but specifics on that deal are few. American-made soybeans, however, are included.

David Erickson, who farms corn and soybeans in Altona, talked to The Register-Mail on his farm after the EU news had come out.

"Europe has not been a customer for U.S. soybeans and soybean products for a long time ... I think good discussions there are positive," he said.

With the USDA funding announcement, Erickson pointed to increased funding for foreign market development and market access programs. Agricultural groups have been seeking for years for those two programs to have increased funding, therefore Erickson views it as a trade off.

"Maybe it's worth it after all," Erickson said. "Results will be telling. Right now, I still remain optimistic that this provides us some good footing."

U.S. reps want trade deals

U.S. Congressman Darin LaHood, R-Peoria, and Congresswoman Cheri Bustos, D-East Moline, cover much of west-central Illinois as their two legislative districts border each other in the Peoria area.

In a statement issued last week, LaHood said, "Corn and soybean farmers across central and west-central Illinois would like to see free and fair trade instead of aid. As much as farmers may appreciate the idea of assistance to counter the retaliatory effects of the current tariffs, the best help would come from long-term trade agreements that would encourage competitive commodity prices. We need customers and markets around the world to sell our products."

LaHood was not available for a phone interview after the European Union announcement.

Bustos also sent out a statement.

"When I talk to soybean farmers, corn growers and pork producers across my district, they’re asking for a coherent and strategic trade policy that creates new export opportunities. During the last campaign, President Trump stood at the podium and said he’d ‘end this war on the American farmer;' that’s the exact opposite of what he’s actually doing," Bustos said in a news release.

Some hopeful for EUdeal

"If the EU ends up buying more soybeans from the Midwest, that would be a great thing," Bustos told The Register-Mail last week. "The president makes these bold predictions with no specifics."

Mike Levin, director of issues management and analysis with the Illinois Soybean Association, said the association is waiting for more specifics on the European Union deal, but he sees it as a positive sign that there is talk about additional trade deals.

"We ultimately know that there are markets for our beans. We know that the markets that we have still absolutely need soybeans. Right now we are concerned that they are finding other means to find those beans from South American and other means," Levin said.

And the tariffs affecting livestock, such as hogs, also plays a factor because livestock eats both corn and beans.

"China is the focus because of their population, but Mexico and Canada are equally as important to farmers," Strom said.

Robert Connelly: (309) 343-7181, ext. 266;; @RConnelly_