Ongoing Trade War

Latest action in U.S.-China trade war forecast as a blow to Hoosier farmers

TERRE HAUTE — Chinese companies have ceased purchases of U.S. agricultural products, a blow to Wabash Valley and Midwestern farmers in an intensifying trade war with the United States.

China’s commerce ministry said Tuesday the measure was in response to President Trump’s announcement last week of new tariffs on Chinese imports. The new 10% tariffs on $300 billion of retail goods such as clothes, shoes and toys, are set to take effect Sept. 1.

China had been the United States’ largest single importer of soybeans, accounting for more than 25 million metric tons of soybeans in 2018, but that has fallen to more than 8 million metric tons this year, between October 2018 and June 2019, according to the U.S. Department of Agriculture.

“Every third soybean grown in the U.S. went to China, but now they are not taking any, so it is a big deal,” said Brad Burbrink, an owner in BE N AG Family Farm in southeastern Vigo County, which farms 6,000 acres.

China previously applied a 25% tariff on soybeans in July 2018, in response to U.S. tariffs on Chinese goods.

“The problem is China has not been taking anything now from us probably for the last nine months,” Burbrink said, especially in soybeans.

“Exports are dead right now and I don’t know how much worse it is going to get, but it is definitely an issue. It would sure spur the agricultural market and make a huge difference if we had China on board” to take agricultural products, he said.

Corn and soybeans are the largest agricultural products produced in the Wabash Valley and across the states of Indiana and Illinois.

Corn is largely sold domestically for livestock feed or for ethanol production, with the largest U.S. corn exports going to Mexico and Japan. However, persistent rainfall this spring put Indiana farmers well behind schedule in planting crops.

“When you drive by the fields, it looks like July instead of August, so we are a month behind,” in growth, Burbrink said. “I think we may yet have a decent crop and are hoping for an average year,” he said.

PERFECT STORM FOR AGRICULTURE

The action taken by China in the trade war “is a devastating blow,” said Jeff Gormong, who serves as the District 7 director on the Indiana Farm Bureau Inc. board of directors, Indiana’s largest farm organization.

“We were already having a very tough year and this will cut into our market. But, I think farmers for the most part understand and believe that China has to be dealt with” due to alleged unfair trade practices, Gormong said.

Gormong, 52, also farms 2,200 acres with Gormong Farms in southern Vigo County. As a farmer and member of Farm Bureau, Gormong said the China trade war shows the importance of expanding agricultural exports to other countries.

“I think this increases the need and importance of getting the United States-Mexico-Canada Trade Agreement passed. Mexico and Canada are still two of our top free-trade partners. If we are going to lose this China market, which I am pretty sure we will, maybe for a while or maybe permanently, we definitely need to be working in other areas to work with other countries” for more U.S. agricultural exports, Gormong said.

Agriculture in 2019 became “almost the perfect storm” for the trade war, Gormong said, referring to an outbreak of African swine fever, a highly contagious disease that’s been called “pig Ebola” that started in China, but has spread to other parts of Asia such as Vietnam and Korea and into parts of Europe, such as Poland, Romania and Ukraine, according to the World Organization for Animal Health.

China’s Ministry of Agriculture and Rural Affairs stated in June that the country’s pig stocks were down 25 percent compared to a year ago.

“We put a tariff on China, but they don’t need our agricultural products as much as they did a year ago” with less swine, Gormong said.

Jack Strain of Strain Farms Inc., which farms 1,500 acres in southern Vigo County, said he thinks the U.S. should maintain its more than year-old tariff against China until better trade agreements can be reached.

“As a farmer, we need China, but we are going to pay a bigger price in the long run if we settle it now?,” Strain, 77, said. “We do need to get this settled as soon as possible because the American farmer is hurting right now.

“But to me, I am all for it," he said. "I say stick with the tariff.”

Strain said bailout payments from the USDA’s Market Facilitation Program over the last two years have helped farmers. Farmers will be paid by the middle of or later this month.

The USDA in July announced details for the $16 billion trade assistance package for farm operators, with $14.5 billion designated as direct payments to farmers in the form of market facilitation program (MFP) payments, to offset the financial losses incurred from the impacts of ongoing trade situations with China, as well as other countries.

In 2018, approximately $8.5 billion was paid to farmers.

Farmers in Vigo County are to get $66 an acre. It is based on a calculation of acreage planted, said Kasey McIntosh, executive director of the USDA’s Farm Service Agency in Vigo County.

“It is different for every county because it is based on what has historically been planted,” McIntosh said. “If there were more soybeans versus corn for a county, it will be a different payment rate for a county with more corn than soybeans.”

The assistance is broken into three payments. The first is 50% of the payment rate. So farmers in Vigo County will first receive $33, McIntosh said. The second payment will be evaluated in November “and depending on how markets are doing, farmers can receive up to 75 percent of the remaining ($33) payment,” she said.

The third payment is the remainder of what is left over.

While the last two payments currently are not guaranteed, Strain thinks farmers will receive the full amount.

“I think with the farmers’ economy and a presidential election coming up, they will make the payments,” he said.

Burbrink agrees, saying the U.S. government wants to ensure the farm economy is stable and that the U.S. food supply remains intact.

“The reason why the government does those payments is food security for the country,” Burbrink said.

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