2018-04-11 / Front Page

Farmers wary of potential soybean tariff

BY MARGARET WHITMER
Reporter


Dennis Gardner Dennis Gardner Soybean growers are used to the ups and downs of the world market.

And while they are very concerned about the escalating trade conflict between the U.S. and China, they are trying to maintain a cautious, wait-and-see attitude in the hope that tensions can be defused before it hurts area farmers.

"There's definitely some uncertainty," said Dennis Gardner, a Fremont Township farmer and member of the Michigan Soybean Promotion Committee. "I hope there's a way to get both sides together to talk about it."

China’s threat to levy a 25 percent tariff on imports of U.S. soybeans didn't strike growers out of the blue, said Kathy Maurer, financial and marketing director for the Michigan Soybean Association in Frankenmuth.

"This wasn’t new information," she said. "It's something we knew was possible. We've known about this for months. It's been in the pipeline for a while. We just didn’t know when it was going to hit.

"What we do know for sure is that China is one of our biggest markets," she added. "The staff, I know, has had a lot of sleepless nights not knowing what was going to happen and when.

"But farmers are used to this. If there's a coup in another country, that upsets the market. We continue to do what we can. We have time."

China's announcement of a potential soybean tariff came in reaction to Donald Trump’s tariffs on Chinese goods, which may not be imposed until early June.

Public consultations and potential tariff revisions may buy time for negotiations to forestall them, Maurer explained.

"There is a thirty-day period in which comments can be made to Washington about this and we have been very busy commenting," she said. "Then Congress will vote on it. They are not going to enforce it if we don't back down."

While the American Soybean Association is very busy negotiating with legislators in Washington, groups such as the United Soybean Board and the U.S. Soy Export Council are talking directly with their buyers in China and other countries, she said.

"We do have good people in Washington," she said. "The U.S. Soybean Export Council has other markets, but China’s the largest, and it still would hurt, regardless.

“The U.S. government and U.S. farmers have partnered for decades and worked hard to establish foreign markets for U.S. soybeans, including in China.

"There are ways to counter China’s policies on intellectual property and information technology in a way that does not require the use of tariffs,” Maurer believes.

Michigan is the number 12 soybean-producing state in the nation, with 2.3 million acres of production in 2017 that yielded more than 104 million bushels.

International competitors Brazil and Argentina are harvesting now, while Michigan growers start planting in May and June.

But now is when the future crop gets sold, and China is top buyer, importing $13.9 billion of U.S. soybeans in 2017, 60 percent of total U.S. exports, according to the Michigan Soybean Association.

After China announced a potential tariff, soybean futures were down nearly 40 cents a bushel in early hours of trading last Wednesday and remained down by midday.

With a projected 2018 crop of 4.3 billion bushels, American soybean farmers lost more than $1.7 billion in value to their crop during morning trading, the Association announced.

“We are already in a deeply uncertain time in the agricultural economy, and soybean farmers are extremely concerned that the escalating conflict between the U.S. and China will cause further damage,” said Association President Dave Williams.

“The tariffs announced by China will lead to real money lost for farmers that they won’t be able to reinvest in their farms or spend at local equipment dealers, restaurants or movie theaters in rural communities throughout the nation. This situation is entirely preventable and must be resolved.”

Gardner, meanwhile, remains optimistic and supportive of the current administration.

"I think we need to get the trade deficit back in balance," he said. "It does affect local farmers. We'll know more in May how negotiations go. I’m not pushing the panic button yet. But I think government officials need to be educated on how farms work."

If the tariffs are enforced, farmers could lose $1-$2 off of every bushel of beans.

"I don’t want to see that happen," Gardner said. "We still rely on China. But I think the administration we have now will follow through. Past presidents talk and don’t do anything. If this is what it takes to get China to the table and talk, that’s what we have to do."

Public comments on the recommended tariffs are due to the U.S. Trade Representative by May 11. A hearing will be held May 15. Post-hearing comments are due May 22. The Administration then has 180 days in which to make a decision.

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