As soybean tariffs start, Minnesota farmers fear the worst

Published 7:50 pm Friday, July 6, 2018

By Mark Steil, Minnesota Public Radio News


You can see the impact of China’s tariff spat with the U.S. at the Farmers Cooperative Elevator in Hanley Falls.

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There, thousands of bushels of Minnesota-grown soybeans are dumped into rail cars, headed for the Pacific Northwest and then out for export.

Assistant general manager Bill Doyscher doesn’t know exactly where the beans will end up, but since China is the biggest buyer of U.S. soybeans, it’s a fair assumption that some of his trainloads will end up there.

China was scheduled to make good Friday on something it’s threatened for months: A 25 percent tariff on U.S. soybeans.

Doyscher, like a lot of the Minnesota soybean farmers he works with, is worried the trade spat will raise the price of U.S. soybeans to Chinese consumers, which could reduce his soybean exports.

“If export business tails off, then the volumes don’t move, and then the efficiencies are less, and your opportunity for income is less,” Doyscher said last week.

So far, he said, his elevator’s export business is good, but he’s seeing signs of a slowdown. Orders for future delivery have already begun to lag.

Some Minnesota farmers fear these ongoing trade issues will make it impossible for them to stay in business: That the new tariff will hurt U.S. soybean exports to China, reduce what they’re paid for the soybeans they sell and, ultimately, reduce their profits.

Some of those fears have already become reality: Because the market tends to respond ahead of changes, prices have already been dropping for several weeks in anticipation of the move.

Before a rally President Donald Trump held in Fargo last week, a group of farmers held a demonstration to let the president know they’re worried that his tariff program will reduce exports. But Trump told the crowd not to worry.

“Your farmers, your people, are going to be great,” he said. “So we have things cooking now. You’re going to be so happy.”

But some farmers are starting to wonder just how good of a cook the president is.

Jerome Schwagerl farms near Beardsley, in western Minnesota. When Trump took office, he said, he was willing to hold out on making any judgments, to give the new president enough time to work on trade issues.

But now that Trump is implementing his strategy, Schwagerl said he has seen enough.

“He’s going to bankrupt agriculture trying to do it,” he said.

Grain prices have been dropping ever since the president’s trade disputes with China, Mexico, Canada and the European Union began last spring. Soybean prices alone have dropped by about 18 percent.

“I don’t think there’s any farmer that can continue producing a crop for what the prices are right now,” Schwagerl said.

He wonders if he’ll be in business a year from now.

Farm marketing consultant Dan Hueber is also watching closely, studying how bad things could get.

This year’s profits were already forecast to drop about 4 percent from last year, continuing a five-year-old agricultural slump.

But Hueber said the trade-related decline in grain prices could reduce profits even further, cutting next fall’s harvest revenue nationwide by as much as $10 billion.

“Farmers as a whole have been pretty stout supporters of President Trump,” Hueber said. “I think that’s beginning to wear thin.”

The U.S. and China continue to negotiate their trade differences, but so far there hasn’t been any breakthrough.

“There’s large gaps between the two sides, and there’s very little trust between the two countries and negotiators,” said Cosette Creamer, a professor at the University of Minnesota, whose research includes international trade disputes.

“Reaching some grand deal or solution that will address all of the U.S.’s concerns with the Chinese economy is probably not very likely in the near term.”

That ongoing hostility only increases farmers’ anxiety over trade’s direct impact on their financial futures.

“The producer comes in and he says, ‘Wow, this is just terrible,’” Doyscher said. “Well, yeah. It is. It’s not good.”

His role, he said, has gone beyond that of a grain elevator manager to something of a counselor.

“Let’s wait and see,” he tells the farmers he works with, “because things can change. And you’re doing a good job of growing your crop, let’s concentrate on that. And the price thing might work itself out in the end.”

Doyscher said he can’t be sure that things will even out for the farmers he works with, but in the end, he figures, he might as well offer a little bit of hope.