Tariffs to have impact in Stevens County
Farmers in Stevens County are among those who send about $12.4 to $14 billion worth of soybeans to China each year.
After President Donald Trump imposed tariffs on about 800 products from China and China responded with a 25 percent tariff on American goods, many of them agricultural products such as soybeans, it appears soybeans grown this year in the county may not be headed to China this fall.
The loss of an important market has implications for farmers, grain elevators and down the line, businesses in ag-centric areas such as Stevens County.
"Any issue with tariffs making it more difficult to trade our resources such as soybeans and other ag commodities does put a stress on the market," said Rob Fronning, vice president of insurance and commodity marketing education with Ag Country Farm Credit Services. Fronning covers a territory that includes Stevens County. Fronning said some analysts have said the tariff will cause an $11 billion hit to farmers.
"Normally at harvest, 70 to 80 percent of the soybeans are brought to the elevator. If there is no market...," CHS New Horizons manager in Morris Terry Johnson said. "The problem for all elevators is the soybean market normally goes to the West Coast and on to China. Now, there is not a new crop market."
Elevators don't have the room to store soybeans from the 2018 harvest, Johnson said.
Juggling the soybean market will be a challenge, Johnson and Fronning said.
Johnson said farmers may choose to store their soybeans this fall. They will likely need to sell corn to make room for soybeans, he said.
Fronning said storing soybeans is one option that clients he works with will need to consider. Farmers will need to ask "Does it make economic sense to store soybeans?" Fronning said.
Some farmers may have enough storage on the farm while others may need to rent storage space, Fronning said.
Elevators will be forced to find storage space this fall, Johnson said. He's not sure yet what the plan will be for CHS.
And while they plan for soybean storage, the elevators will also look for alternative markets, Johnson said.
But finding another market doesn't always mean the best economic news, Johnson said. There are additional transportation costs and costs associated with finding different markets, Johnson said.
"It's a financial burden...," Johnson said.
While Trump has planned a $12 billion aid package for farmers that is related to the tariffs, Johnson said none of that aid is directed to elevators.
"No doubt there will be financial implications," Johnson said. The ag business has been tough the past few years and the 2018 situation makes it tougher, he said.
"You are going to see consolidations," Johnson said of elevators. Cooperative elevators may not just consolidate with other elevators but they may also consolidate with fuel or similar cooperatives, Johnson said.
Fronning said early reports of Trump's planned aid package show it won't be a dollar-for-dollar match to farmers. Farmer would only recover a portion of what they lost.
"It's better than nothing. At least you get a portion back," Fronning said.
"Every year can be a make or break year," Fronning said. "The past four to five years have been tight. In certain areas, we've had bigger yields which have allowed farmers to break even, make a (small profit) or even just lose a little bit of money."
Ag Country's February forecast projected a tight year for farmers, Fronning said. Yields began to look good and that tight expectation was loosened slightly to an expected small profit or break even year, Fronning. Tariffs have now lowered expectations, Fronning said.
Fronning said 2018 could be the kind of year that causes some farmers to stop farming.
At the same time, some farmers who have a reserve built up could find opportunity if some farmers choose to sell land or stop renting land, Fronning said.
Farmers are used to tightening their belts but if the belt is tightened again, businesses will feel it, Fronning said.
A truck dealership may not see as many farmers buying a vehicle, he said. The farmer who replaced a pickup on a three-year rotation may now use a five-year rotation, Fronning said. Farmers may eat out less and cut back on other expenses, Fronning said.
Elevators and agriculture businesses will also feel a ripple effect, Fronning said. The elevator may not hire the additional grain semi driver, for example, Fronning said.
Fronning said the tariff on imported goods from China could have a lasting positive impact but he'd just as soon it not happened. It's too early to tell what the long-term implications will be, he said.
"We need (China) to come back," Johnson said. "The longer it continues, the harder it is to get them back as a customer. Once they go elsewhere, it's a lot tougher to get them back."