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Iowa farmers tighten belts amid trade and tariff uncertainty

Qualms replace confidence over China trade relations

Jun 17, 2019 at 1:38 pm
    Steven Buchta (right) trade commissioner for the Consulate General of Canada in Minneapolis, Minn., speaks Friday as fellow panelist and farmer Mike Paustian of Paustian Enterprises listens during the Trade & Foreign Markets: Challenges & Opportunities discussion at the Iowa Ideas 2018 Conference at the DoubleTree by Hilton Hotel Cedar Rapids Convention Complex. “I started this job about a year ago and never thought I’d be talking about a 10 percent tariff on beef jerky,” Buchta said. (Jim Slosiarek/The Gazette)

    CEDAR RAPIDS — Most Iowa farmers are weathering the economic hit brought on by international trade and tariff wars, but crop and livestock producers worried at Friday’s Iowa Ideas Conference that 2019 might be a financial reckoning if disputes don’t get resolved and America’s competitive position restored in export markets.

    Eastern Iowa farmers Dave Walton of Wilton and Mike Paustian of Walcott said they expected most Iowa farmers won’t have a choice but to participate in a federal program currently offering up to $4.7 billion in aid for producers hard hit by the lowest commodity prices in six years brought on by President Donald Trump’s tariff war with China and renegotiation of the North American Free Trade Agreement.

    They also thought farmers were taking “belt-tightening” steps to get through the current downturn but worried the financial “hammer” could come next year if farm prices stay below the cost of production.

    “There’s a lot of uncertainty right now and that makes it difficult to make long-term plans when you’re not sure what the lay of the land is going to be,” Paustian said.

    “It’s kind of a guessing game on how long things are going to be up in the air and that makes it difficult to make plans for the future of your farm,” he added. “The longer it goes on, it kind of becomes a slow drain. You can survive a few bumps in the road but eventually the car’s going to have to go in and get some maintenance done on it and that’s kind of the situation that we’re in right now.”

    On top of that, said Walton, he is concerned about the possibility of long-term damage to U.S. trade relations — fostered by years of personal relationships — now being eroded as other countries take advantage of those markets.

    “The thing that gives me heartburn is that we’ve spent 30-plus years building personal relationships with China,” he said. “This year isn’t so much of a concern for me, it’s 2019 and beyond. If this thing stretches out over time, we’re giving opportunities to our competitors around the globe to steal our market share. That what keeps me up at night.”

    Steven Buchta, a trade representative for the Canadian consulate in Minneapolis who also participated in the Iowa Ideas trade and foreign markets discussion, said Canada is hoping to modernize NAFTA but in the meantime is looking at other opportunities as well for emerging and developing markets.

    He said Canada has a long history of negotiating trade deals with the United States but the tariff flare-up has created uncertainty for many of his nation’s economic sectors as well.

    “I started this job about a year ago and never thought I’d be talking about a 10 percent tariff on beef jerky,” Buchta told conference participants. “We enjoy Jack Links and these sorts of products, but this is sort of a little bit of the world we’re living in.”

    Walton said he had heard talk of tough trade negotiations but the current situation developed way faster than he expected. “I think there are ways we could have softened this blow a little bit,” he said.

    While Paustian said the federal aid package being assembled by the Trump administration is an appreciated gesture, “it’s not going to make anybody whole, it’s not going to just make the pain go away overnight. But hopefully it will allow a lot of family farmers to survive to fight another year.”

    In the meantime, he is concerned the United States is just “spinning its wheels” in the trade arena while other countries take advantage.

    “It’s not that the rest of the world is kind of sitting on the sidelines while we hash out some of these trade disputes. Other countries are actively signing new trade agreements with a lot of the countries that are very good trade partners with us right now. So it’s really a case of by standing still, we’re kind of falling behind and that potentially could do more long-term damage because we’re going to have to earn back some of these markets that we’ve had in the past.”

    Paustian said he would like to see U.S. negotiators “go on offense” by finding bilateral trading partners “because it seems like we’ve been playing defense for quite a while.”

    Steve Sukup of Sheffield-based Sukup Manufacturing said his grain-bin business has been hard hit by a 30 percent spike in steel prices, but the trade war also has produced a positive bump in that more farmers are storing their grain in hopes that prices will be improving.

    Walton agreed, saying, “I think you’re going to see a little more softening of the ag economy but my gut says we’re near a low. We really can’t get any lower than we are right now.”

    Sukup said it’s interesting that Iowa appeared to have “everything teed up” for a boost in trade with China when former Iowa Gov. Terry Branstad was selected by Trump to be his U.S. ambassador to China, but that got derailed by the hefty tariffs.

    “I think a lot of us would have been more comfortable if we would have concentrated on smaller targets than we’re trying to hit,” he said.

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