Nation & World

Can they get a break on bushel? Trade war lull may come too late for soybean farmers

The Gazette

Through the first seven weeks of the 2018-19 marketing year, shipments of soybeans from the United States to China are down 97 percent from last marketing year.
The Gazette Through the first seven weeks of the 2018-19 marketing year, shipments of soybeans from the United States to China are down 97 percent from last marketing year.
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WASHINGTON — The temporary truce in the trade war between the United States and China may come too late to reverse damage to the agricultural sector from existing tariffs that remain in place.

The Trump administration was set to raise levies from 10 percent to 25 percent on $200 billion worth of Chinese imports on Jan. 1.

That increase is now off the table until March 1 under an agreement the two countries reached over the weekend.

However, protective tariffs remain in force on $250 billion worth of Chinese imports to the United States, as well as retaliatory tariffs on $110 billion worth of U.S. products sold to China, including soybeans.

“There is no question that getting rid of Chinese barriers to U.S. businesses does help,” said Robert Kudrle, an international trade specialist at the University of Minnesota.

“But businesses demand certainty. The Chinese announcement doesn’t mention intellectual property, and they don’t talk about deadlines.”

For farmers who cannot break even on the sale of a bushel of soybeans because of oversupply, weather and tariffs, time is running out.

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Through the first seven weeks of the 2018-19 marketing year, shipments of soybeans from the United States to China are down 97 percent from last marketing year.

“The damage is already done in a lot of sectors,” Lance Peterson said from his farm in west-central Minnesota. “A large number of farmers, including me, are looking to refinance.

“Suspension (of new tariffs or increases in existing tariffs) does nothing. I’m not making money, I’m just trying to control my losses.”

For agricultural lenders looking at projected soybean prices below break-even levels, the truce “doesn’t really change anything,” said Kent Thiesse, a vice president and farm loan specialist at MinnStar Bank in Lake Crystal, Minn. “It puts things on hold.”

Growing cycles for soybeans will leave farmers “taking it on the chin,” said Russell Price, chief economist for Minnesota-based Ameriprise Financial.

He thinks the trade war with China “is going to get worse before it gets better.” Critical issues were not mentioned in the announcement of the trade war truce, he said.

In recent years, China has purchased roughly a third of the U.S. soybean harvest. If the Chinese immediately start back buying U.S. soybeans, it might help some, said Kristin Duncanson, who grows soybeans and raises hogs in Mapleton, Minn.

But in retaliation to the Trump administration’s punitive tariffs, the Chinese already have committed to purchase soybeans from Brazil.

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How much market that leaves for American producers is unclear. Retailers, which face inventory cost increases for Chinese-manufactured goods, got better news when the U.S. agreed to delay an increase in existing protective tariffs from 10 to 25 percent.

Target Corp., which imports a large percentage of its inventory from China, declined to comment on the temporary trade war truce.

But on Monday, U.S. Agriculutre Scretary Sonny Perdue said, “We don’t think there’s enough soybean supply in South America to tide (the Chinese) over to the new crop (in) South America.”

China likely will start buying soybeans from America at the start of the year, Perdue said, according to Reuters.

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