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Tariffs Could Be a Long Haul
Chris Clayton 7/19 8:55 AM
LA VISTA, Neb. (DTN) -- As some of the nation's leading soybean farmers gather to focus on checkoff priorities for the United Soybean Board, they can't avoid the pressures they face from tariffs, and they're placing a lot more emphasis on export diversification strategies as well.
John Heisdorffer, president of the American Soybean Association and a farmer from Keota, Iowa, joined the meeting just outside of Omaha as a liaison for the American Soybean Association (ASA). He relayed to the checkoff board members some of the conversations last week in Washington, D.C., when ASA held a board meeting and soybean farmers spent a lot of time on Capitol Hill.
"It seems like they all got the same word. Their congressman didn't like the tariffs, but didn't really know what to do about it," Heisdorffer told DTN. "I did hear a little bit in D.C. to be ready for a long haul. This isn't going to be a short-term thing."
Heisdorffer mentioned the need to ensure federal funding is available to tap other markets. And that mindset is a big part of the USB meeting this week. "I think there's a recognition we need to diversify and not put our eggs all in one basket, like with China," said Polly Ruhland, CEO of the United Soybean Board.
Putting all of those eggs in one basket became a problem when China hit U.S. soybeans with a 25% tariff earlier this month, following a volley of tariff threats and retaliation between the U.S. and China that continues to intensify.
Jim Sutter, CEO of the U.S. Soybean Export Council, said talk within the soybean industry about diversifying markets has been going on for several years. Yet, exports to China kept growing. Diversifying markets, though, takes time as markets slowly increase their reliance on a country.
"We're continuing to work on other markets," Sutter said, adding that this is being helped along now because Brazilian soybeans cost more than U.S. beans.
India is a market USSEC would like to see expand, but these investments aren't going to translate into large export volumes overnight. There is potential for more soy demand for poultry and aquaculture, but it will take time for that to develop.
Pakistan and Bangladesh used to source more soybeans from India, but now are reaching out more on the world market.
Those long-term investments can pay off, as is the case in Egypt. This year, Egypt is the largest single growth market with a high volume of poultry and aquaculture. "We think their demand will continue to grow," Sutter said.
USDA announced a sale to Egypt last week of nearly 40 million bushels of soybeans divided between old-crop and new-crop sales. Sutter also pointed to Indonesia and Vietnam as growth markets, but he reiterated that growing these markets takes time and relationships.
"I can tell the farmers in the group are getting more frustrated and getting worried," Sutter said. He pointed to a North Dakota farmer showing him a cash bid for new-crop soybeans that was $7.36 for November delivery.
While the United Soybean Board meets here this week, other farmers are still trying to get their point across in Washington. At least three leaders from the American Farm Bureau Federation testified Wednesday before a House Ways and Means Subcommittee, warning that farmers will not only lose money but possibly go out of business if the trade war continues.
"Our farmers are facing a perfect storm," AFBF Vice President Scott VanderWal said to the congressional subcommittee Wednesday. "We also have the potential of going into harvest without a new farm bill. The ingredients of this perfect storm -- trade threats, lower income, the lack of labor and no farm bill -- will be more than our farmers can handle."
VanderWal told lawmakers, "We must ask: What is the exact goal? What is the exit strategy? If we knew this would all be over within a few months, we could hang in there and manage around it. Obviously, none of us know the time frame, and that uncertainty is very detrimental."
In La Vista, Heisdorffer told DTN that farmers more associated with the soybean industry or other commodity groups are engaged on the tariff issue and more concerned about the risks not only to their own farms, but to others as well. Then there is a group of farmers who see no significant risk with what is happening.
"There's this other group of farmers who kind of got their heads stuck in the sand, the way I say it, and just think that it's all going to work out," Heisdorffer said.
At the USB meeting, Heisdorffer said he's been encouraged by comments from other farmers to keep up the commentary and focus on seeking some kind of trade resolution.
Heisdorffer said his biggest concern is for younger farmers who haven't experienced crisis such as the 1980s, when he recalls seeing a generation of farmers decimated economically.
"And I'm afraid that's what's going to happen here," he said. "A bunch of these guys who have only been farming about 10 years started out in some good times, but since then, it's not been so good. If things don't turn around, there are going to be a lot of farmers going to the bank next spring for an operating loan and it's going to be hard to get."
Once July 6 hit and the tariffs began, Heisdorffer said, the U.S. lost a certain amount of exports for the year that won't be recovered.
"Those folks have made up their minds they aren't going to buy from the U.S. right now," Heisdorffer said. "They have gone elsewhere to fill their needs and they aren't going to come back."
Yet, while the U.S. soybean industry looks for a way around the tariff mess, Heisdorffer and Sutter made similar comments about increased focus on acreage expansion in Brazil. Sutter said Brazilian farmers will not only plant more acres this fall but some will try planting earlier so they can harvest earlier as well. That would add another complication for the U.S. export market season.
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
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