State of the Farm - July 2018
Wars and rumors of wars
In most conflicts or disagreements, war is the last option taken, but a financial war on small farms has started in both America and China. The US agriculture sector is having to bat cleanup in this global trade, offensive with US trading partners. The only player more screwed than us, is China. They have no means to win a trade war with the US. They can’t counter Trump’s $500 billion in tariffs. The Trump administration stayed true to its word as it announced the next set of tariffs on $200 billion of Chinese imports. They are planning a 10% tariff on hundreds of food products as well as tobacco, chemicals, coal, steel, and aluminum. It also includes consumer goods ranging from car tires, furniture, wood products, handbags and suitcases, dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products. The tariffs will not be imposed until after a two-month period but should go into effect around August 20th.
Last year after China opened their market to US beef we exported 3,000 metric tons to them the last half of 2017. This year to date we have exported 2,300 metric tons. On July 6th, China put a 25% tariff on our beef in addition to the previous 12% tariff, so we are now paying 37%. Beef imported from New Zealand already enters China duty-free. Don’t look for a lot more beef shipped to China this year, just one more battle in the war.
The current local revenue losses are in the $140 range per soybean acre. Corn and soybeans are currently rated good to excellent, so the supply will be here come fall. What are you going to do with your crop? Don’t be surprised if grain storage prices go up as steel prices have in the war.
Making trade fair is a real concern for the health and future of our ag economy here in Kentucky and Indiana. We had to face this problem eventually and now that we are, be prepared. You may need to try something different to avoid additional risk. The real war on each farm is knowing your breakeven point because this holds the keys to who wins the real trade war.