The typical midwestern corn and soybean grower lost tens of thousands of dollars in potential revenue due to steep declines in commodity prices over the past four weeks, said Purdue economist Brent Gloy on Monday, listing global trade uncertainty as an obvious factor. “The changes have taken expected farm profitability from near break-even to a rather substantial loss,” Gloy said in a blog.
“There is no denying that the disruption in trade relations with China is unsettling to many in agriculture,” wrote Agriculture Secretary Sonny Perdue in a “wave the flag” essay published in USA Today. Perdue appealed for patriotic patience as a Sino-U.S. struggle for primacy unfolds. “If the president succeeds in changing China’s behavior, America’s farmers will reap the benefits,” he said before mentioning President Trump’s order on April 5 that the USDA shield producers from “China’s unfair retaliation.”
“If China does not soon mend its ways, we will quickly begin fulfilling our promise to support producers, who have become casualties of these disputes,” said Perdue. The administration has declined to say how much it would spend or what form that support would take. There have been rumors of a $15 billion farm fund, drawn perhaps from customs duties, and reminders of the USDA’s broad authority to prop up crop prices or boost farm income.
In response to U.S. tariffs on imported steel and aluminum, China imposed a 25 percent tariff on U.S. pork and 10 percent tariffs on U.S. ethanol, apples, and almonds. Canada and Mexico said they, too, would hit U.S. farm goods as well as manufactured products because of the steel and aluminum tariffs. China has threatened to put high tariffs on U.S. soybeans, beef, cotton, corn, ethanol, dried distillers’ grains, grain sorghum, wheat, cranberries, orange juice, tobacco, and whiskey, along with industrial products, if the United States follows through with plans to put 25 percent tariffs on $50 billion worth of Chinese high-tech products. The tariffs on high-tech goods are punishment for the theft of intellectual property from U.S. firms, says the White House.
China, Canada, and Mexico are the three largest customers for U.S. farm exports, which are forecast at $142.5 billion this fiscal year. Exports generate 20 cents of each $1 of farm income.
Writing on the Agricultural Economic Insights blog, Gloy said the revenue outlook for corn and soybean farmers has deteriorated since early spring. “The decline in expected profitability … is substantial. The total [corn and soybean] rotation now shows an economic loss of $90 an acre.” Since the last week of May, when corn and soybean prices peaked, crop revenue has declined by $78 an acre. For a 2,700-acre farm, Gloy wrote, “that would amount to a $210,600 swing.”
Farmers and rural voters, who were key to Trump’s election, have benefited from regulatory relief and tax cuts, wrote Perdue. “Farmers should know this: They have stood with President Trump and his policies, and we will make good on our promise to stand with them as well,” he said.
Politico reported that this week the White House is likely to announce “new restrictions on Chinese investment in the United States and the technologies that can be sold to China. … Like the tariffs that Trump imposed on $50 billion in Chinese imports — and those he has threatened to impose on $400 billion more if Beijing retaliates — the new investment restrictions and export controls are intended to pressure China to stop unfair trade practices that threaten the United States’ technological leadership,” said Politico.