Farmer Anxiety Grows Over Trade

May 16, 2019 02:03 PM

A few day price rally won't make up for all of the uncertainty this planting season. From tariffs to weather, farmers across the country say uncertainty makes planning for this season next to impossible.

Soybean farmer Bret Davis, of Delaware, Ohio, is spending plenty time out of the field and inside this soggy spring. It's the storm brewing in Washington that has him uneasy. 

"We have spent 40 years making a trade partner with China, along with other countries," says Davis. "China has grown to be our largest trade partner."

Until 2018, One of every three rows of soybeans being grown was finding its way to China.

"What I'm worried about is, what does that do to our market down the line," asks Davis. "Once you lose that customer -- especially as sharply as what's happened in this time period -- what does that do down the road? Can you gain that market back? That's very scary for us, as the American farmer."

For him, the uncertainty from failed trade talks makes a sharp pencil and good management a secondary consideration. 

"Compared to where we were a year ago, we're looking at a loss of $3 dollars a bushel," figures Davis. "So, on 14,000 bushels of beans that we have left, that'd be almost a $45,000-dollar loss."

President Trump is now calling for another round of assistance somewhere between $15 billion and $20 billion. 

"There are going to be some limitations about what USDA can do but they can do more," says John Gilliland, of Gilliland and McKinney International Counselors, a D.C.-based law and policy firm specializing in international trade, agriculture, and international policy issues. 

He says that includes the possibility of buying commodities to send as food aid.

"As for how they do it, purchases to send around the world, I think that's going to be a little harder to pull off," says Gilliland. "We'll see what they can come up with, but the market is already soft and there's only so many places you can put the extra commodities."

Davis, says what farmers really want is to regain a foothold in major markets.

"We have to be able to make a profit, and at least break even," says Davis. "Where we're at today, for the next four to five years, I don't see that happening until we have this trade war settled."

This, as prices find a footing amid weather concerns around planting. 

"The U.S. China deal fell apart and the market was actually able to rebound," says Virginia McGathey, President of McGathey Commodities. "There are huge carryouts that are still a factor and with trade talks really producing nothing, at this point, it seemed like down was the only way it could go."

Joe Vaclavik, the President of Standard Grain says regardless of the weather, demand is the question mark.

"What is this rally going to do for demand," asks Vaclavik. "It's probably not going to be good."

He says exports have been sluggish across the board including competing with large South American crops, a currency disadvantage, and African Swine Fever in China. 

"So big picture here, we still have a lot of very negative fundamentals, but short term, it's all about the weather," says Joe Vaclavik. "I think the funds here in this large speculative shorter are a little bit nervous."
While uncertainty now rules the day, farmers like Davis still believe in free trade for their products.

"That's how we survive, is to be able to sell that crop freely throughout the world," says Davis. "That doesn't mean that the American farmer comes out on top, that means that both of us are our customers."

He says as the seller, they have a fair shot at winning that market. 

"That's all we want is a fair shot," says Davis. "We want free trade, not tariffs."

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Spell Check

Olton , TX
5/18/2019 11:39 AM

  Russia dumped all its US Treasury holdings some time ago. China will follow that lead. Our continued deficit spending is going to prove to be a disaster.

Hazelwood, MO
5/18/2019 06:46 AM

  Froggy, I agree. Unfortunately tRump's easy to win trade war did not account for the "other" ways that China can punish us. The end game will be that tRump saves face prior to the elections by signing an agreement that won't be any better than what previous administrations have signed, but he will tout it as monumentally better. His base will believe him. Reality is that the trade war will have cost all of us dearly and the only winner will be tRump if he is re-elected. We should hold tRump accountable for his Difficult To Win Trade War Without Victory.

5/16/2019 04:19 PM

  I think we should be very worried..We will have to see how the treasury bonds sell tomorrow. China has been buying our debt. Unfortunately we still have deficit spending,with the best economy in 50 years.So if China dumps our treasuries,interests rates may increase.That would impact us pretty hard,with everything else.


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