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‘Nothing looks promising’: farmers wary of trade war

SoVaNow.com / May 16, 2019
With the U.S. and China locked in an escalating trade dispute, county soybean and tobacco farmers are feeling the impact as their crops are listed among the thousands of U.S. products that have been hit with 25 percent Chinese tariffs.

“The facts are that China has been one of the major players in the game,” said Rebeka Slabach, Agriculture and Natural Resources Agent at the Virginia Cooperative Extension.

The trade war has put Halifax growers in a bad spot, according to Slabach and growers themselves who worry about the impact on crops such as tobacco and soybeans.

“Definitely we will have less tobacco producers next year,” Slabach said. She noted that soy acreage has also decreased.

Local farmers Ronnie Waller and Garland Comer have been paying close attention to the tariffs that President Trump has ordered placed on Chinese imports, and the response by the Chinese, who have targeted agricultural areas supportive of the president for retaliatory tariffs.

The toll taken by the trade war is magnified by an-other drag on tobacco production: a persistent oversupply of unsold leaf.

“It seems to really be hurting tobacco farmers. You just know it’s [the trade war] affected a lot,” Waller said.

The soybean crop tells a similar story. According to Tony Banks, Senior Assistant Director of the Department of Agricultural Development and Innovation at Virginia Farm Bureau, “Every third row of soybeans planted in this country [the United States] is destined for export to China.”

Along with soy, Halifax farmers export much of their tobacco to China as well.

“I’d say 60 percent of the tobacco we grow in Hali-fax County is for the export market,” said Comer.

Comer explained that U.S. tobacco was expensive on the world stage even before tariffs were imposed, and surplus tobacco has driven down demand. Tobacco, which is grown on contract for large tobacco companies, tends to bring stable prices because companies will only hand out as many contracts as they think will be needed to meet demand.

For Halifax farmers like Comer and Waller, this has meant fewer contracts this year

“I got some neighbors that weren’t even offered contracts. It’s a recession when it’s your neighbor. It’s a depression when it’s you,” Waller said.

Virginia Farm Bureau information says that plant-ing intentions for tobacco has dropped by 27 percent, from 24,380 acres in March of 2018 to 17,940 in the 2019 report. Banks said the majority of this decrease was at-tributable to the tariffs.

China Tobacco International, the state-held company’s branch in the United States, is keeping the 2018 U.S. tobacco supply in storage in hopes that a trade resolution can be negotiated and end tariffs on both sides. The supply still in the United States is, according to Comer’s guess, valued around $165-170 million and comprises about one million pounds.

While domestic tobacco producers are highly vulnerable to the impact of a trade war, the situation for the soy business it is less clear.

Waller said the relatively high value of the dollar was making U.S. products weak against foreign competitors, particularly from Brazil. That country has been taking on most of China’s demand for both soy and tobacco, circumventing tariffs on U.S. goods and thus U.S. growers.

Waller expressed worry that China’s turn to Brazil might have permanent repercussions.

“Say they [Chinese companies] go to Brazil and pick that market up, then it’d be difficult to get back into that market,” Waller said.

Comer, who farms more soy than he does tobacco and keeps track of the market with an app on his phone, expressed similar concerns about Brazil: “Brazil’s one of our major players in tobacco and soy … Our quality is better but we can’t compete price-wise.”

Comer pointed out that Brazilian farmers can sell their soy product at roughly $1.50 to $1.65 per pound while Halifax farmers must be above two dollars per pound. The Brazilian prices, Comer said, were below U.S. production costs.

However, local farmer Adam Davis said the superior quality of U.S. soybeans gives local growers protec-tion against the impact of trade tariffs on the soy crop.

While South American soy is often similar to U.S. beans in terms of protein, American crops are often higher grade and better cared for during transportation, Davis said.

Davis, a 29-year-old farmer, came in third place for a statewide yield competition hosted by the Virginia Soybean Association and Virginia Extension Program. He expressed the view that tariffs were only part of the troubles facing the industry.

“Yeah I’m not too worried. Tariff is just a thorn in the road that will get resolved,” Davis said.

Davis was more concerned with other issues facing soy growers, namely an oversupply situation similar to the one facing tobacco growers. An outbreak of African Swine Fever among Chinese hog herds, a series of global bumper crops, and a shift from corn to soy in the Midwest has raised supply and cut demand, leaving soy prices in sharp decline.

Davis also raises cattle, and though that business is relatively flat, he says that the diversification is his key for managing the increased hardship brought on by the tariffs and other factors. He said that he had not known anyone forced out of business, but believes soy farmers in the Midwest who have higher input costs might not be so lucky.

“It’s going to hurt short term, but if world soybean supply goes down… and China starts to buy our crop again then the grain business is going to be just fine,” Davis said.

Though Chinese companies have largely turned to Brazilian products, many U.S. soy producers have man-aged to survive the tariffs by selling to countries that previously bought Brazilian beans or by selling raw beans for processing in other countries.

The problem with these strategies is that they low-er the price of soybeans in the U.S. as companies seek to make back the losses they incur for shipping through middlemen. The price of soy has fallen 11-year lows, ac-cording to the Virginia Farm Bureau.

Comer and Waller were less confident than Davis that local growers will see a rebound in demand once the tariff dispute between the U.S. and China is resolved. De-pending on which company a farmer sells to, and whether that crop is destined for export or domestic use, tariffs may or may not directly affect the farmer.

However, Comer said, “I’m scared if we go further into 2020 [without a deal] they [the Chinese companies], may find other outlets for tobacco. They might not come back.”

Chinese materials also go into the manufacturing of farm equipment and in other inputs needed for farming, which raises the costs of production. At the same time, oversupply has lowered prices, leaving Halifax farmers paying more and earning less.

“It’s just hard to do anything when we’re paying more for producing, but we can’t sell our product,” Comer said.

Waller, who is 62 and a lifelong tobacco farmer, said, “I think 100 percent of the contract decreases are due to the trade war… I understand some of the reason for it. We lost all the textile mills to China, but it [the trade war] all boils down to the stockholders making money. We’re the little man.”

Banks said retaliatory tariffs on American farm products is “putting pressure on the President,” and said that there was some unrest among the members of Farm Bureau over the situation.

In 2018, the White House provided $12 billion of farm relief to mitigate the damage from Chinese tariffs, but this was paid out in the form of a payment rate multiplied by the crop yield for the year. In Halifax, floods and other problems kept that yield very low.

Banks said, “2018 was a difficult year both in markets and weather across Southside.”

The administration has announced a similar farm relief program for 2019, but it is unclear whether farmers still support the president and his bellicose policies as strongly as they previously did.

Davis, for one, was unequivocal in his support, saying, “I’m willing to suffer a little bit if it’s for the good of the country.”

Other farmers expressed less certainty, and many who were interviewed for this piece did not want to talk about politics.

“I really didn’t support it [tariffs] when it started,” Waller said.

Comer surmised that while many farmers were being hurt by the policies, “I think everybody is still on board [with the Trump administration.]”

“Nothing in agriculture looks promising right now, nationwide,” Waller said.

“Something’s got to happen,” said Comer.

What if it doesn’t happen?

Comer said, “I haven’t gotten that far.”



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Comments

NEWS FLASH: Tobacco is dead as far as a production crop. The farming community needs to have more diversity in crops, embrace Hemp & legalize other things like Colorado. This trade war is necessary and I applaud our President for trying to level the playing field. Textiles and industry have left our country due to lower production costs overseas, NAFTA was a joke and has devastated our country as a whole. There is no way America can compete in the world market with OSHA, EPA, and Unions driving costs up so the only thing to do is tariff goods. It is a not 100 percent a trade issue but rather the fact that Vape and E-cigarettes are the chosen way to smoke for millennials and it spells the end of traditional cigarettes as we know it in the future.

Comments

Correction to my earlier post- The Commonwealth of Virginia and the General Assembly need to provide other pathways for for farmers and legalize other crops like Colorado. Archaic thinking and the Dillon Rule has long crippled rural Virginia.


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