Local farmers say they are feeling the effects the trade war with China.
While some wonder if the Trump administration’s tariffs on Chinese goods and the Chinese government’s retaliatory tariffs on soybeans will spark long-term consequences, others aren’t so sure the tariffs are entirely to blame for the current market.
The tariffs have resulted in a decline in soybean exports to China and a drop in the price paid for a bushel of soybeans. As of Nov. 1 there has been a more than 90 percent drop in sales and exports of soybeans to China as compared to last year, according to data from the United States Department of Agriculture.
In May, farmers in Ashtabula County could get about $9.80 per bushel from Centerra Co-Op, which has several locations throughout the county, and on Friday the price was about $7.90. There have been several tariffs imposed over the past year, said Jean Bratton, Centerra CEO, and the price of soybeans has been on a decline throughout the year.
An almost $2 decline per bushel is the difference between profitability and loss, Bratton said. Farmers across the Midwest are letting soybeans pile up, some hoping the trade war ends before those beans rot.
“We have been impacted just as much as anywhere nationally,” Bratton said of Ashtabula County.
Centerra pre-sold beans going into harvest in anticipation of potential problems, Bratton said. Centerra sells to third parties who broker to others, and Bratton said the co-op is sticking to its contracts.
Centerra also added one million bushels of storage space prior to harvest out of a worry it would not be able to sell much after harvest.
“Anything we didn’t have contracted to sell by June, the opportunity disappeared very quickly,” Bratton said.
Tariffs definitely shut down the export market, she said, but the tariffs also occurred at a time when there were “phenomenal yields” across the country, so there is an abundance of soybeans with no where to ship them.
Ohio and Ashtabula County do ahve are other domestic markets for the product, Bratton said. There are a large number of feed mils, a livestock base and soybean meal extruders in the region.
“We’re fortunate to have a domestic market, and one that has been growing,” she said.
Still, about one third of soybeans in Ohio are exported to China, she said.
Bratton said some farmers she encounters support the Trump administration even as the tariffs affect them directly. Others say farmers are taking the brunt of a trade war aimed at helping the coal industry.
“I represent a lot of farmers and they’re all over the board on how they feel about this,” Bratton said.
That’s a sentiment Andrew Holden, Ashtabula County’s Ohio State Extension ag and natural resources educator, expressed as well. Some think the tariffs will raise income in the long term and others think it is hurting more than it will ever help.
“It’s a touchy subject and a lot of people are losing money this year on their soybeans,” Holden said.
No one in the county exports directly to another country and most sell as a commodity on prices set by the Chicago Board of Trade. In Ashtabula County, the price farmers get for soybeans has always been lower than in farms near the Ohio River, Holden said, where beans can be barged to the Mississippi River and down to Louisiana.
Ohio is actually on the outer edges of the grain belt, Holden said, which is why prices were always slightly lower. The price always has it ups and downs, he said, however, the current drop is significant.
“Eight or nine years ago soybeans were in a cycle where they were ridiculously high,” Holden said. “Recently, and partly because of the tariffs, they are substantially lower.”
Cherry Valley soybean farmer Bob Gale, who has farmed about 1,000 acres for 40 years, said the tariffs are an example of how international policy can come back to hurt the local area.
“It’s costing us a lot of money so far that’s for sure,” Gale said. “Before this started soybeans were around $10 a bushel and now it’s around $8. That’s a lot and it’s the difference between making money and not making money.”
Jeff Magyar, a soybean farmer in Wayne who farms about 1,500 acres, said the large crop yields have more to do with the drop in prices and exports than the tariffs. He also said China historically doesn’t buy many U.S. beans from May to November because the crop is growing and they get what they need from South America.
“This is the time China starts to buy,” Magyar said. “China is also shrewd enough to make the announcement that they’re not going to buy any beans and the price will drop 50 cents or $1 a bushel. Then they will come in and buy beans on a low.”
Magyar said he is supportive of Trump and wants the United States and China to come to an agreement. The United States can’t rely on just having a service economy, Magyar said.
There’s also an issue because purchasers must pay tariffs to the Chinese, meaning American-owned companies in China are paying tariffs while Chinese soybean production companies owned by the Chinese government are not paying the tariffs, Magyar said.
There’s more politics being played than people realize, Magya said, and people should have seen the red flag decades ago as American factories began to shutter and new ones opened in China. Magyar is hopeful that this trade war will be worked out in favor of American farmers.
“If the U.S. farmer is given a level playing field we can compete with anyone in the world,” Magyar said. “We can provide a product at the cheapest price. This trade issue should have been addressed 30 years ago so maybe we didn’t become the rust belt.”
The Trump administration has created a $3.6 billion package to help farmers weather its trade war. Farmers can apply, report what they produced and in turn they can get subsidies of $1.65 per bushel for soybeans to ease the dollars-per-bushel they are losing as a result of tariffs.The payments are scheduled for half at harvest and half later in the year, Bratton said.
Gale said while he believes the government should be fiscally responsible, the government created the problem and he will take what they are giving if eligible.
“My position is I’m obviously not going to say no because it’s out of my pocket to start with and they’re just putting it back,” Gale said.
However, Magyar said about 15 or 20 percent of the county’s soybean production is by Ashtabula County farmers who are likely not eligible to receive the soybean subsidy. Farmers dropped out of the program years ago because government regulation of their farming, he said.
Bratton said the other big producer of the world’s soybeans are countries in South America, which will begin harvesting in February. If trade issues with China aren’t resolved by February, and if South America has a reasonable to large harvest, it will hit the United States hard.
“That’s when our farmers will really feel it,” Bratton said. “The price could take another hit because we will be sitting on all these soybeans and now the other big producer is back in the market.”
Gale said he believes the United States will lose market share as China cultivates other markets and those other markets increase production.
“What I’m concerned with is the long term,” he said.
However, Magyar said even if China and the United States don’t work things out, the United States can explore other markets in European countries.
“European buyers are contacting U.S. buyers whereas before they relied on countries in South America,” Magyar said. “If China buys all their beans from Brazil, the people who bought their beans from Brazil aren’t going to have access to them. They’re going to have to buy them somewhere.”
A recent study by The Ohio State University examined the potential effect of these tariffs on Ohio farmers, according to a release from the Ohio Soybean Association, of which Magyar is the Northeast Ohio district director. Researchers found the proposed tariffs could decrease a farm’s net worth by an estimated 6 percent and annual net income by 59 percent over a six-year period, the release states. According to a separate study conducted by Purdue University, total U.S. soybean production would decline by 15 percent.
“We need to find a way to come to the table and start negotiations,” said Allen Armstrong, OSA president and a Clark County soybean farmer. “We need to end this back and forth trade dispute that is hurting farmers and rural America. This is no longer about short-term price drops. Ohio farmers are going to experience long-term negative impacts from these actions for years to come.”
Ohio is the sixth largest producer of soybeans in the U.S., with 4.8 million acres planted in 2017 and more than 60 percent of the state’s entire soybean production was exported to international markets, according to the Ohio Soybean Association. China imported $13.9 billion in U.S. soybeans in 2017, 60 percent of total U.S. exports.
“We continue to ask the administration to address trade concerns with China in ways that do not put the future of Ohio soybean farmers at risk,” Armstrong said.