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Tariffs could slam local farmers

BY Spencer Durham - sdurham@chronicle-tribune.com

Proposed tariffs by China could drop Indiana soybean revenue by $150 million annually if enacted, say Purdue University experts.

China announced plans to put tariffs on $50 billion worth of U.S. imports after President Donald Trump announced possible tariffs on Chinese goods valued around the same price. The tariffs proposed by the Asian and world superpower targets American goods such as soybeans, whiskey, airplanes and cars, according to an NPR report.

The budding trade war could have adverse effects for farmers as a 25 percent tariff would be placed on soybeans coming into China.

As it stands now, the U.S. provides 29 percent of all soybeans used by China, which is the leading consumer in the world for the product. The amount of U.S. soybeans supplied to China in 2017 was valued at $12.4 billion, according to statistics provided by Purdue. Thirty percent of all American soybeans are exported to China.

Chris Hurt, agricultural economics professor at Purdue University, said if the tariffs are imposed, a big “if” at the moment, China will be apt to turn to other world suppliers of the crop, mainly Argentina and Brazil. China would still purchase some soybeans from the U.S. to round out their need, though. The tariffs would reduce the U.S. to what Hurt calls a “residual supplier” of soybeans to China.

Put simply, “We’ll be the last place they buy beans,” he said.

A study by Purdue ag economists indicates over a five-year period a sharp decline in U.S. soybean exports to China (65 percent), a drop in global soybean exports (37 percent) and a 15 percent decline in U.S. soybean production if tariffs are imposed.

Indiana is the fifth largest producer of soybeans in terms of acreage. Assuming a five percent in price reduction due to the tariffs, Indiana farmers would see revenues drop $150 million annually, the study suggested. This would drop annual farm income by about 10 percent, according to Hurt.

Hurt added that farm income has dropped by about half, compared to a boom period a few years ago. Margins have been tight lately and another significant blow to income would not bode well.

“Trimming that another 10 percent would not be a pleasant situation,” Hurt said. “For farmers, these tariffs would be difficult but not devastating.”

When the tariffs were first announced prices took a noticeable dip, said Kurt Thieleke, general manager for Matthews Feed and Grain.

“It affected the market really big ... but by the next day ... the market came back some,” he said.

Hurt said the initial market shock had soybeans down 55 cents. By the time markets closed that day prices had rebounded a bit, down only 22 cents.

Much like other discussions surrounding tariffs between China and the U.S., Thieleke said, at least for the moment, it’s “all talk.”

“I think it’s all talk, threats,” he said. “I think later down the road we’ll come together (and work something out). It’s not a big concern of ours right now.”

Thieleke did say if imposed there would be a considerable impact to the market, but it’s just too soon to tell.

Gail Phipps, a farmer in the northern part of Grant County, said the potential tariffs do worry him but it’s out of his hands, much like the weather and many other factors that go into farming.

“I’m still going to raise soybeans, corn and wheat like I always have,” he said.

Phipps said a local grain buyer told him they expect some sort of compromise to occur as well between the two countries.

“When push comes to shove, somebody is going to give in,” he said. “We just don’t know who yet.”

Hurt said there is a 60 day comment period before tariffs could be imposed, which gives plenty of time for discussion, compromise and possible solutions.

“There is sometime for cooler and rational heads to prevail,” he said.