Tariff Turmoil in Times of Abundance
Aug 24, 2018
By Tim Burrack: Arlington, Iowa
U.S. crop export prices dropped like a rock last month, falling by more than 5 percent. That’s the fastest dive we’ve seen in seven years, according to a report issued on Tuesday by the Department of Labor.
Government figures are important for understanding trends, but they cover up a lot of individual stories.
So let me tell you what these export-price statistics have meant for my farm in Iowa, where I grow corn and soybeans and raise hogs. Or, to look at it another way, let me tell you about my farm’s financial snapshot.
We’re facing tariff turmoil in a time of abundance.
The price of corn has dropped 30 cents since June 1st. With a big crop coming, it is hard to quantify what is tariffs and what is Mother Nature and good farming practices.
Soybeans are a different matter. At the start of June, November soybeans were selling for about $10 per bushel. A month later, as China and Mexico imposed their retaliatory tariffs, they’d declined to $8.32 per bushel. On August 15, they were selling for just $8.08—for a plunge of nearly $2 in two months.
Maybe a number cruncher in green eyeshades can explain how much of this fall is due to tariffs and how much to farmers growing lots of soybeans. I say let’s just split the difference, calling it $1 for tariffs and $1 for a good crop growing in the field.
If that’s true, then it means soybean tariffs have cost me about $30,000 this summer.
That’s a lot of money—but I’m just getting started.
I also raise hogs. Right now, I’m raising about 20,000.
Two months ago, I could sell a 300-lb. hog for $180. Yesterday, the best price I could get was half as much, just $90.
Again, we’re confronting the twin problem of tariffs and overproduction—and for simplicity’s sake, with China’s tariffs on pork at 78.2 percent and Mexico at 20 percent, let’s just split the difference once more and assume that I’m losing $45 per hog on account of the retaliatory tariffs.
Now it’s simple math, and it shows that the trade-war pork tariffs have cost me $900,000.
That’s a lot of bacon—and it’s a big problem for me, my family, and my employees, as well as our entire industry.
Every farmer knows that some years are good and some years are bad. The rain falls or it doesn’t. We defeat weeds and pests or we don’t. We produce too much of one thing and not enough of another.
These environmental and economic factors are often beyond our control.
A trade war, however, is another thing. It’s not a natural disaster or an economic cycle. Instead, it’s a man-made difficulty. The one we’re facing today is manufactured entirely in Washington, D.C.
How long will this trade war last? Nobody knows. We hear that perhaps we’re on the verge of a new NAFTA, but Congress probably won’t get around to considering it until next year at the soonest—and even then, we don’t know whether it will approve a deal.
China seems ready to stick out the trade war for quite a while. The Wall Street Journal reports that the United States and China soon will begin “lower-level, exploratory talks.” With progress like that, who needs setbacks?
Things could get a lot worse before they get even a little better. Case in point: The recent drop in foreign currency rates means that U.S. exports are becoming more expensive, even without tariffs.
Add it all together, and you’ll understand why this farmer is turning into a pessimist about the future.
That’s my story—and one that you won’t hear from federal statistics.
I hope the trade negotiators are listening because the tariffs and abundance are upon us.
Tim Burrack raises corn, soybeans and pork on a NE Iowa family farm. He serves as Vice-Chairman and volunteers as a Board Member for the Global Farmer Network (www.globalfarmernetwork.org) where this column originates.
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The column first appeared at The Hill on August 18.