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Bumper crops and tariffs pose double whammy for Iowa farmers
DES MOINES - For the first time in roughly two decades, Trent Thiele is not expanding his Northeast Iowa farm.
It's too risky, Thiele said, because prices on crops and livestock are too low thanks in large part to growing international trade disputes.
'We usually try to expand a little bit every year just so we aren't going backward,” said Thiele, who farms pigs, soybeans and corn in Howard County. 'We did not expand any at all this year due to where we're at, with the uncertainty.”
With the United States initiating trade disputes with Canada, Mexico and China - three of Iowa's four largest trading partners, according to federal data - farmers across the state expressed concern that a protracted trade war will have a devastating impact on their livelihoods.
Hog farmers have been dealing with lower prices since April, when China added a 25 percent tax on U.S. pork imports. That was in response to a new U.S. tax on imported steel and aluminum.
A second round of tariffs, implemented Friday, were applied to $34 billion of imported industrial goods from China in an effort to curb the country's practice of appropriating technology from U.S. companies wanting to do business there. China responded again, adding tariffs to U.S. goods including soybeans and pork.
Iowa is the No. 1 state in the nation for pork exports and No. 2 for soybeans, according to federal data from 2016. Prices on both have been falling in anticipation of the Chinese tariffs.
'Long-term, if these tariffs stay in effect, it could be very devastating to us,” said Bill Shipley, a soybean farmer from Adams County in Southwest Iowa and president of the Iowa Soybean Association. 'If this continues, this will not bode well for the Iowa soybean farmer, or agriculture as a whole.”
Farm finances in Iowa already had been on tenuous ground; many crops had been selling at or below the cost of production over the past three years.
With all the trade disputes helping drive prices even lower, farmers' concerns have grown.
Soybean prices last week fell to $7.79 per bushel, according to a Bloomberg report, the lowest in years.
'It's been a long time since we've seen a 7 in front of beans for a price,” said Robb Ewoldt, whose Scott County farm in Eastern Iowa includes soybeans, corn and cattle. 'That's really scary when our break-even is $9” per bushel.
Shipley similarly said the price of beans has fallen $2 a bushel below his cost of production.
'That will affect our bottom line,” he said. That price 'is not sustainable. I cannot continue to do that if I sold today.”
Pork prices have fallen after reaching an all-time high in April, said Gregg Hora, who farms hogs, soybeans and corn near Fort Dodge and serves as president of the Iowa Pork Producers Association.
'Trade discussions and disputes are having a negative effect on (prices) at this time,” Hora said.
For many Iowa farmers, especially soybean farmers, the lower prices will hit hardest around this fall's harvest, when farmers will begin selling their crop.
They could face a double dose of trouble as prices may also be depressed because of what appears to be a strong crop this summer. More output means more product and thus less demand, which typically stunts prices.
'In our area, the crops look incredible,” Ewoldt said. 'I have older generations telling me to take pictures and write it down in the journal because they've never seen it this good.”
But he added: '(The tariffs are) going to make it difficult for a lot of operations that have struggled the last two years, and then you see this on top of it. As if it wasn't challenging enough. This is going to make it even more challenging.”
Some farmers already are feeling the impact and dipping into their savings, Thiele said.
'We did have some saved up,” Thiele said. 'We are burning through some of our reserves. If it continues on for another five years, it could be very detrimental to the whole pork industry and the whole state of Iowa.”
Some farmers hope contracts they signed over the winter, before prices dropped, will help minimize the damage.
Ewoldt sold a portion of his crop when prices were still in the range of $10 per bushel, and such contracts are not uncommon. The impact of that, however, will be lessened by the expected bumper crop, Ewoldt said. Instead of locking in what he thought would be roughly three-fourths of his crop at that price, it appears likely it will be only roughly half.
Thiele warned falling crop and livestock prices will not hurt only Iowa farmers, but rural communities in general. When farmers have to cut back on spending.
'When you expand, all that money goes to the construction worker, the concrete worker, the electrician. All of those people in rural Iowa make a living off this,” Thiele said. 'Without us making any profit, it's cutting into rural Iowa just as much as it is the Iowa pig farmer. It's an everlasting effect.”
Farmers hope for a fast resolution to the trade dispute, although negotiations have not produced much headway, according to national media reports.
Some farmers said they understand the desire of the U.S. administration, under President Donald Trump, to resolve trade imbalances, but want to avoid becoming a casualty in a prolonged trade war.
Farmers said the trade disputes also are hurting trade relationships in markets that have been developed over decades.
'I understand where the administration is coming from. It just really stinks when we're going to pay the price,” Ewoldt said. 'It's very frustrating. We've developed relationships as an industry in China. We've got customers over there that want our grain, they want our pork. ... Now all of a sudden, through the politics, all of that work is for naught at this point.”
Jerry Mohr, a director of the Iowa Corn Growers Association who has long worked on trade issues, expressed concerns about the long-term impact of frayed relations, saying it takes time to build up trust and make agreements work.
'That circuitous road you have to go to get a bilateral trade agreement is long and curvy,” he said.
Mohr, a Scott County farmer who has been in the business since 1973, said once those relationships are in place, it's vital to preserve them.
Thiele said he would encourage the U.S. administration and trade leaders to resolve the disputes 'as soon as possible,” and noted in Iowa many of the current elected officials were put in office on the strength of rural voters.
'It's hurting everybody in rural Iowa, and in Iowa a lot of our representatives, that's where they depend on their votes,” Thiele said.
Meantime, Iowa farmers are bracing for a trade war that, for the moment, has no end in sight.
'I've got to be an optimist and hope we will survive this,” Shipley said. 'But it's going to be tough sledding, I think, for a little bit.”