Northwestern Corn Belt farmers hit hardest by trade war, want trade, not aid
Farmers in the northwestern Corn Belt have generally been supportive of the trade war, saying they'll take short-term pain for long-term gain ... as long as that pain doesn't last too long. Soybean farmers this far west have been hit the hardest because such a large percentage of their crop goes to China.
Bob Metz, a Browns Valley, Minn., farmer says, "70 to 80 percent of our soybeans are exported and all of that pretty much goes to the West Coast."
Also, basis levels are historically wide for beans and some elevators are not even bidding, not wanting to take on the risk.
Jerry Schmitz is the president of the South Dakota Soybean Association. "The concern is right now, farmers aren't quite sure of what's going to happen during harvest, where is their product going to go?" Schmitz says. "And when you are in limbo, you're not sure where price is."
Metz says, "Well I think that's the biggest concern. Up in our area, it is very common to see a $1.30 negative to the Chicago Board of Trade." And those basis levels are only expected to get wider at harvest.
Pork producers in the region also have felt a huge market loss from the trade battle. Dave Preisler, Minnesota Pork Producers Association CEO says, "On a per head basis, you know we're looking at $40 to $45 a head as we get into this fourth quarter."
He says recent studies indicate the pork industry has been the hardest hit sector of the economy in Minnesota. "If we look at, you know, the losses that are looking to accrue to Minnesota pork producers are basically equivalent to the economic gain that Minnesota had from hosting the Super Bowl," he says.
Pork producers have some hope with a tentative Mexican deal that at least that market will open back up.
Brad Greenway, Mt. Vernon, S.D., pork producer says, "Mexico I think still is number one in volume and so it's huge. The thing is they take the products that we don't consume in the U.S. and so it's a lot of the variety meats and things like that. They're huge in the ham market."
Meanwhile, USDA recently announced a trade aid package that gives soybean farmers $1.65 per bushel on half of their 2018 crop. But farmers say they want trade, not aid.
"It's a Band-Aid. We would prefer to get our money from the market rather than from the government," Schmitz says.
Other grains did not fare as well, with trade aid for wheat at 14 cents per bushel and corn at only 1 cent on half of production. And pork producers don't believe the $4 per head payment they'll receive comes even close to market losses.
"It's a big amount of every pig that I sell off our farm comes from trade, so the $4 is a very small amount and you could say it's a Band-Aid," Greenway says.
However, pork producers did do better than the dairy industry, where farmers will get only 12 cents per hundredweight on 50 percent of their milk production.
Rep. Kristi Noem, R-S.D., isn't sure if USDA disseminating payments on only 50 percent of production is an indication the administration thinks the trade war will last for a while. Noem says, "They want to get that first payment out there, help some folks out that really have been devastated by the situation and then re-evaluate and look at that second payment."
Sen. John Thune, R-S.D., has not been a big fan of the trade war and now the trade aid package. "Yes, it was 50 percent of the crop based on actual production, which we think is problematic for areas of the state where they didn't get bushels this year because of either drought or flooding or hail," he said. "We've made some suggestions to them about other ways that they could distribute the assistance."
Farmers also agree the trade war needs to be settled quickly, but Terry Branstad, U.S. ambassador to China, says he's not sure how long it will last.
"I can't really predict it," Branstad says. "We're continuing to have discussions. I'm trying to keep the leaders in Washington informed and do all that we can and we've had several meetings and we're going to continue work on it."
Branstad said he believes the tariffs are completely warranted. "China has not treated us or other countries fairly for a long time with their stealing of technology and also not enforcing intellectual property rights; the trade deficit has gone up and up," he says.
So farmers hold on and hope they can make it until the trade war is resolved. Says Bob Worth, who farms near Lake Benton, Minn., "You know, we're on the fourth year of a really bad financial situation in agriculture and then put this on top of the four bad years, that's what's going to be tough."