China Deals ‘Body Blow’ to Struggling U.S. Farm Belt

Date: Wednesday, August 7, 2019
Source: The Wall Street Journal

Farmers, agricultural groups decry retaliatory move to stop buying U.S. crops and livestock

The U.S. Farm Belt braced for deeper pain from the escalating trade battle between the world’s two biggest economies after China said it would suspend all imports of U.S. agricultural goods.

China’s move will affect farmers raising fuzzy green soybean pods in Illinois, milking cows in California and feeding hogs in North Carolina, all of whom have seen business suffer as a result of tariffs that Chinese officials implemented last year.

China’s suspension of U.S. farm purchases is a “body blow” to U.S. farmers and ranchers, said Zippy Duvall, a Georgia farmer and head of the American Farm Bureau Federation. “We urge negotiators to redouble their efforts to arrive at an agreement, and quickly,” he said.

Feeding China’s growing appetite has meant big business for the U.S. farm economy. China was one of the biggest export destinations for U.S. agricultural commodities from 2009 to 2017 alongside Canada and Mexico, according to the U.S. Department of Agriculture. In 2017, Chinese buyers imported $19.5 billion in farm goods.

That dropped to $9.1 billion last year as China’s tariffs on U.S. soybeans, pork, milk and other products made them more expensive for importers there, prompting some to seek alternatives and scale back imports from the U.S. Over the first six months of this year, China’s agricultural imports from the U.S. were down 20% from the same period last year.

Given the scale of China’s agricultural imports, it would be hard for U.S. farmers to make up for those sales even with much higher exports to other nations, economists say.

The trade fight is ratcheting up financial strainafter years of low crop prices and persistent spring rains, which forced some farmers this year to delay planting or to file insurance claims over lost crops.

“I don’t know how much more the farm economy can handle,” said Andy Huston, a sixth-generation farmer in Warren County, Ill. “The uncertainties are the worst.” Mr. Huston, who grows 2,200 acres of corn and soybeans, has struggled to navigate a record-wet spring followed by dry weather this summer. He calls this year his worst since he started running the farm with his brother in 1992.

Still, he continues to support President Trump. He said he appreciates the aid the Trump administration has paid to farmers while officials fight over trade with China. Mr. Huston said he believes China is aiming its retaliatory actions at farmers to erode support for Mr. Trump.

The USDA last week began signing up farmers for a program that will disperse about $14.5 billion to U.S. farms, following a roughly $10 billion program last year. Farmers say the government payments will help but likely won’t make them whole.

“As they have learned in the last two years, our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do - And I’ll do it again next year if necessary!” Mr. Trump tweeted Tuesday.

Jim Mulhern, chief executive of the National Milk Producers Federation, said dairy exports to China have dropped 54% so far this year. “Any step away from an agreement that further escalates tensions puts recovery of these sales further out of reach,” he said.

The trade battle and bad weather are also hurting agribusinesses. Research firm Trade Partnership Worldwide LLC projected in February that tariffs on U.S. exports could cost the country’s agricultural sector 59,000 to 71,000 jobs over the next two years.

Fertilizer maker Mosaic Co. on Tuesday cut its earnings forecast for this year as a result of the wet spring weather, sending its shares down nearly 7%. Cargill Inc. cited the dispute last month when the Minnesota-based company reported a 67% drop in quarterly profitsArcher Daniels Midland Co., after reporting a 58.5% decline in quarterly earnings last week, warned that China is becoming more comfortable buying food elsewhere, recently approving poultry imports from Russia and pork shipments from Argentina.

“People find alternatives, and eventually, they become a little bit more comfortable with those alternatives,” said Juan Luciano, ADM’s chief executive. “This is not good for the U.S. farmer. This is not good for the percentage of U.S. in the export markets.”

Near Los Banos, in California’s Central Valley, Bowles Farming Co. is planning to decide by January whether to switch to more profitable crops after tariffs pushed down cotton prices. That could involve laying off workers, said Chief Executive Cannon Michael.

“You don’t have the luxury of planting something that you know you are going to lose money on,” Mr. Michael said.

 

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