Farmers deal with soybean downturn


(8/6/2018)

by CHRIS ROGERS and NATHANIEL NELSON

Not all local crop farmers are feeling the pain of the Chinese tariffs on U.S. soybeans yet, but it has some worried about the future. “Next year, I’m very concerned because if things don’t turn around that’s quite a chunk of money,” Ridgeway farmer Andy Kronebusch said. “Hopefully our government and the administration can get this straightened out,” Winona County Farm Bureau President Glen Groth stated, adding, “Trade is extraordinarily important to American agriculture.”

The decreased soybean prices came after a months-long trade dispute between China and the U.S. which began in March of this year. On March 22, President Donald Trump threatened $50 billion in tariffs on Chinese goods, citing Chinese theft of intellectual property. Months of threats and complaints traded between the two countries followed, though many of these were eventually walked back. A 25-percent tariff on $34 billion in Chinese goods began on July 6, focused primarily on high-tech imports, and Beijing responded in-kind by implementing tariffs on American exports, which includes soybeans among other agricultural exports.

After the tariffs, local soybean prices fell. From 2013-2017, soybean prices at Southern Minnesota barge terminals ranged from $8.28 to $14.88 per bushel, according to the USDA. This year, prices rose to a high of $10.20 in March and remained stable until June, when China announced retaliatory tariffs on soybeans and local prices dropped rapidly to $8.14. Those tariffs came into effect on July 6. Local soybean prices bottomed out at $7.63 in mid-July and were hovering just above the $8 mark at the end of July, according to the USDA.

That drop in prices is not hurting all crop farmers right away. Like many local growers, Kronebusch sold much of his bean crop in advance, on contract. “You promise them that you’re going to deliver so many bushels in October or November, and then they’ll turn around and sell them to someone else,” he explained. Kronebusch accepted a contract in February, when prices were fairly good, and now most of his crop is locked in at a decent price. “We’re very happy that we contracted when we did,” he added.

Warren Township farmer Everett Rolfing has a bit of both: beans he is growing to meet a contract and beans growing in the field that have yet to be sold. If the current low prices persist, rather than selling those beans for a loss this fall, Rolfing said he would plan to store his beans over the winter and wait for better prices. Because he does not have enough storage infrastructure on his farm, Rolfing would need to pay to store them elsewhere. “Hopefully the price comes up next spring or summer, but then I’ve got all the storage costs, too. So that’s a gamble,” he stated.

It is not just the cost of storage that creates issues. Brian Maliszewski, a farmer from Arcadia, sells between 50 and 80 percent of his crops via contract each year, leaving some for him to sell afterward. “But right now, the price of bushels are below the break-even point, which brings the average for contracted bushels down,” he said. Like Rolfing, Maliszewski will be storing some of his crops and waiting for a better price.

Until prices rise and he is able to sell, Maliszewski said the money he put into the crops just stays tied up. Not only will he not make any profits, he will also have to worry about not having the funds to prepare for next season. That in turn causes a ripple effect, as other big agriculture businesses experience the impact. “You don’t have that money to stimulate the economy, and to pre-buy all the inputs for next year, like seed, fertilizer, and chemicals. We’re not buying equipment as much, either. It puts pressure on all the other vendors out there, and ultimately affects everyone,” Maliszewski explained.

Additionally, with many farmers choosing to store, the market might fall victim to more instability. “When prices do go up, farmers move to sell all their bushels, which drives the market back down very quick,” Maliszewski explained.

The federal government has yet to announce exactly how a $12-billion bailout, which Trump proposed to help farmers affected by Chinese tariffs, would work. Rolfing said he has not given the programs much thought. “Generally, in the past, whenever there’s been something like that, the paperwork is such a nightmare. Most guys get halfway through and want to quit,” he stated. “That might keep a few guys going, but that’s no solution,” Rolfing said of the bailout.

Rolfing seemed to feel that talk about soybean prices falling because of the trade war was overblown. “I don’t think soybeans dropped significantly more because of the tariff situation. They were already going significantly down,” he stated. He pointed out that soybeans are far from the only farm commodity doing poorly right now. Corn and milk prices are also low.

Groth is concerned about the potential long-term effects of a trade war on crop prices. He stated that other countries may choose to increase production to meet China’s demand for soybeans. In the future, will American farmers regain access to the Chinese market or will China have found other places to get its soybeans from, Groth wondered. “[The Chinese] are going to get their soybeans somewhere, and I don’t think they will have any trouble developing other regions if the Americans keep their tariffs in place,” he stated.

Trump has said that U.S. farmers should be patient now and that the current trade skirmishes will ultimately give American producers better access to foreign markets. Are local farmers optimistic that tariffs will benefit them in the long run? Groth chuckled. “Not really,” he said. “I think the best we can do is get back to where we were in the first place.” Rolfing noted that farm equipment costs have risen as a result of U.S. tariffs on foreign steel. “All of the consumers are going to feel the effects of this trade-war situation,” he said. “I think it could have been handled differently. It probably should have been done 20 to 30 years ago. It’s almost too late to do something now when you have that big of a trade deficit.” Kronebusch stated, “I hope Trump knows what he’s doing. I know he says he does. Right now I’m skeptical.”

Maliszewski has diversified his operation to insulate his farm from losses in any one particular area. “We can hope that it straightens out, but that’s all we can do,” Maliszewski said. “I think that it will, and that the market will level out in the near future, but nobody knows for sure.”

Kronebusch and Rolfing said they are not making any changes to their operations in response to changing trade policies and prices. “Obviously you’re always thinking about that,” Rolfing said. “What you can do about it is another situation. I’ve never tried to outguess the market by planting more corn or more soybeans because about the time you do that, it turns out the opposite way you were thinking.” Kronebusch said, “We’ll just plan [for next year] and hope for a good yield and a good price. I don’t need to go to Treasure Island because we gamble every day.”

Chris@winonapost.com

 

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