Farmers starting to feel effects of trade war

As Dale grain and beef cattle farmer Dennis Whitsitt watches his crops grow in the fields, he also watches grain prices tumble as tariffs between the U.S. and several other countries take effect.

The Trump administration began talking about imposing tariffs on Chinese imports in January, starting what has come to be called a trade war. Trump’s threats led China to threaten retaliatory tariffs on U.S. goods, including soybeans and pork. Both countries enacted the threatened tariffs on July 6. The administration also imposed tariffs on goods from the European Union, Canada and Mexico, leading those countries to impose retaliatory tariffs as well. Those tariffs also included farm goods as foreign leaders looked to hurt areas that voted for Trump. In Whitsitt’s opinion, the tariffs have hit their mark, as far as farmers go.

“It doesn’t seem like a good strategy,” Whitsitt said of the trade war.

So far, soybean prices have dropped about $2.50 a bushel. Although Whitsitt acknowledges that soybean prices were dropping before the trade war started, for prices to drop $2.50 in a few months is abnormal, he said.

Ernie Brames, a hog and grain farmer near the Dubois County 4-H Fairgrounds, also attributes the price drop to the tariffs. The Chicago Board of Trade, which sets day to day grain prices, operates on emotional news such as weather scares and political comments, such as the talk of tariffs from world leaders, he said.

“It’s no different than the stock market as far as what can cause it to stay positive or fall negative,” Brames said.

He worries for other grains as well. When the price of one grain falls, he said, it’s not uncommon for the prices of others to follow. Corn prices, for example, have also dropped recently, though not as much as soybean prices.

Farmers’ worries are not unfounded. China imports 62 percent of U.S. soybean exports, and studies from both Ball State University and Purdue University economists project losses to the soybean industry. Michael Hicks, an economist and director of Ball State’s Center for Business and Economic Research, estimated a roughly 11.5 percent decline in commodity prices for Indiana farmers. According to a study for the U.S. Soybean Export Council by Purdue University agricultural economists Wally Tyner and Farzad Taheripou, a 30 percent tariff would likely result in a 40 percent drop in U.S. soybean exports, resulting in a 5 percent price drop over a few years. The 25 percent tariff enacted July 6 likely places the loss near that estimate.

As for pork, a study by Purdue University professor of agricultural economics Chris Hurt found that the shift in the global market caused by the tariffs could drop U.S. pork prices up to 4.4 percent. While the price drop would help pork farmers sell more domestically and in other countries, Hurt’s study didn’t expect the increased sales to fill the gap left by China.

Brames and Whitsitt have heard President Trump’s assurances that farmers will be fine, but they aren’t convinced.

“To say that it’s gong to get better, that doesn’t do any good,” Whitsitt said. “With the farm economy as it is, some farmers may not be around next year.”

Whitsitt has heard that the Department of Agriculture may do something to help farmers, but he doesn’t think that’s the best option. The farm industry has been working for years to get away from government aid and rely more on market supply and demand, Whitsitt said. As someone who served on the board for the Indiana Corn Marketing Council, he’s familiar with the shift the farm industry has been working toward.

“This is basically distorting the markets,” he said of the current situation.

Whitsitt also worries about what the trade war will do to trade relations in the future. The U.S. farm industry worked to gain foreign markets for years, and building up the necessary trust takes years. His concern is that the Trump administration’s tariffs on allies such as the European Union and Canada will erode that trust.

“It takes years and years and years to build up those relationships,” he said. “Then they’re gone in kind of one stroke. It’s disappointing.”

The good news this year, at least for area farmers, is that the weather so far has provided the right conditions for a good crop, Brames said, which makes farmers happy. Before prices fell, Brames said, local farmers seemed on track for a great year. Now, he said, the good crop will allow them to get by while farmers in other areas will struggle.

“We can always sell (the crop),” he said. “It’s a matter of what you can get for it.”