Soybean farmers undermined by U.S.-China trade war

The Wagner family farm has 300 acres of soybeans stuck in the North Dakota earth, and whether they will ever be worth a dime remains an open question.

“It’s just been a perfect storm against us,” said Val Wagner, 41. “It’s not just one thing. Trade is an important issue, but a lot of things are beyond anyone’s control.”

The Wagners and other soybean growers across the fruited plain are in a precarious position partly because of the U.S. trade war with China. The uncertainty over that huge export market and the ripple effect it has had on crops from harvest to table have left farmers in a bind.

The soybean harvest normally would have been completed in October, but the beans remain in the dirt or in already swollen-to-capacity silos and grain elevators, a victim of the trade war.

In July, the Trump administration imposed 10 percent tariffs on more than $200 billion of Chinese imports, citing unfair trade practices by China, including dumping products and intellectual copyright theft. In retaliation, China slapped tariffs on some $60 billion in goods it imports from the U.S., including soybeans.

“Between mother nature, the tariffs and storage issues, we’re not done yet, unfortunately,” said John Buck, a farmer and custom harvester in New Bloomington, Ohio. “Right now, we still have some soybeans sitting in the ground, and the quality will go down while the loss potential on that crop goes up every day.”

Mr. Buck and Ms. Wagner say they believe the situation for farmers will be better in the end, but the end needs to come sooner rather than later. Ms. Wagner said final decisions must be made by the end of the year.

The farmers welcome the 90-day “cease-fire” that President Trump and his Chinese counterpart, Xi Jinping, agreed to in Argentina last weekend, but it does little to change the situation in the ground. Farmers are scrambling for time and space, with neither component showing signs of growth.

For the farmer, the transaction ends when the soybean is sold to whoever stores it. While some of this year’s harvest is tied to contracts signed before the trade war erupted, those hoping to sell their crop on the spot market or to major exporters face a daunting challenge.

From September 2017 to August, 1 billion bushels of soybeans left America via the Great Lakes, down the Mississippi River to New Orleans or out of Pacific Northwest ports heading to China, according to economists with the Department of Agriculture. That marked the first 12-month decline in soybean exports in a decade. Since August, exports to China have plunged 97 percent.

“We’re down to almost nothing,” an Agriculture Department official said.

China buys one-third of all soybeans planted around the world, and the U.S. and Brazil account for two-thirds of all soybeans grown, said John Newton, chief economist with the American Farm Bureau Federation. Some analysts are fretting that the market losses could prove difficult to regain.

“Once China walks away from a market, there’s really no one else that can step up and fill those shoes,” Mr. Newton said.

At this point in the calendar, the U.S. typically would have 600 million or more bushels of soybeans shipped or en route to China. This year, the amount stands at 12 million, according to the Farm Bureau.

Mr. Newton said he hopes the 90-day reprieve Mr. Trump and Mr. Xi agree to will provide the necessary window for this year’s harvest.

“Soybean exports are forecast to fall $800 million to $21.0 billion as both volumes and unit values decline, in large part due to weakening demand from China,” the USDA predicted in its most recent quarterly report.

Consequently, people such as Mr. Buck, who farms 700 to 800 acres of soybeans himself while harvesting up to another 1,500 acres, are having to travel greater distances and take much more time to store the harvest. That cuts into profits, slows the process dramatically and means the soybeans in the ground are absorbing more moisture, which reduces their quality, he said.

Some farmers have been granted temporary storage permits, which allow them to keep the soybeans under giant tarps, but that exposes the crop to wind, rain and rats, according to the Farm Bureau.

In some instances, farmers have cleared out their barns and converted the space to storage, reasoning that their machinery can withstand the elements better than the beans, but that option is sometimes eliminated by factors even the most officious government bureaucrats can’t control.

In North Dakota, the first snow dusting came in early October, and one storm brought 8 inches, Ms. Wagner said. The snow mixes with the dust kicked up by harvesting and creates a substance like cement in the machinery, which means the big, expensive combines have to be driven back to base every night to be hosed down and dried out, no matter how far away, and then get back to the field the next morning.

“It just keeps adding more and more expenses, and at some point it’s not worth it,” said Ms. Wagner, who with her husband, Mark, rotates crops on roughly 3,000 acres in Monango, a town with a population of 39 in North Dakota’s southeastern corner.

In July, the Trump administration announced $12 billion for a “short-term tariff relief” package, money that is supposed to be apportioned according to the hit farmers have taken. That would mean more for soybean growers, although other farmers are also feeling the pinch.

For example, half of all U.S. wheat is exported, but China hasn’t bought any since March, said Jimmie Musick, president of the National Association of Wheat Growers.

“NAWG appreciates the administration’s steps to hold China accountable for unfair trade practices, but tariffs and the subsequent self-inflicted need to provide aid aren’t the answer,” Mr. Musick said this year. “Farmers across the country want ’trade, not aid,’ especially wheat growers.”

A consortium of nonprofit groups such as Tariffs Hurt the Heartland has sprung up to apply pressure on the Trump administration to lift or ease tariffs. The trade tactic also has drawn criticism from free trade supporters, although some of them, such as Larry Kudlow, Mr. Trump’s top economic adviser, argued last week that China’s actions have already warped any “free” trade.

The administration’s tariff mitigation funds are paid based on harvest, not what was planted. That means without the “settlement sheets” — the stamped chits farmers receive when they deliver their products — the bailout won’t be available.

“I’d say it’s just a very depressed mood right now,” Mr. Buck said. “We know that the end game here will be a better price for our goods, but the uncertainty of when that’s going to be is weighing heavily on all of us.”