Soy Bean Foreign Affairs: New tariffs create changes in crop production

SYDNEY SCHAEFER/NNY BUSINESS
Ronald Robbins, owner of North Harbor Dairy and Old McDonald’s Farm, observes his soybean crops in one of his soybean field located in Hounsfield.

BY: MARCUS WOLF
Thousands of bushels of soybeans have travelled to consumers in China from Ronald Robbins’s fields in the town of Hounsfield each year. Many farmers have capitalized on the high demand for U.S. soybeans in Asian markets. The roots of producers’ export operations, however, began to retract last year when a barrier was erected between them and China in the form of tariffs.
 

    China imposed 25 percent tariffs on various U.S. goods, including soybeans, last summer in retaliation against U.S. tariffs on Chinese aluminum and steel. After a year since farmers have experienced a decline in earnings from the grain. 

     Robbins Family Grain, owned by the local dairy farmer Mr. Robbins, had bolstered its soybean exports to Asian markets over the past seven to eight years from 20 percent of his crop, or 20,000 to 25,000 bushels, to 100 percent, or 75,000 to 100,0000, he said. Chinese consumers typically use the crop for pig and fish feed and oil. When China enacted the tariffs, however, it cost Mr. Robbins and other producers a crucial market. Prices for soybeans fell from $10 to $12 per bushel to about $8, which caused his profits to decrease and forced him to find new markets last year, he said. 

    “It was about a $250,000 drop last year,” he said. 

    The trade war between the U.S. and China has adversely affected the supply, demand, value and markets for U.S. soybeans. 

    Jay M. Matteson, agricultural coordinator for Jefferson County Economic Development, said price hikes on for Chinese consumers created a downturn in demand for U.S. soybeans. Other countries have also been given an opportunity to fill China’s soybean demand with their products, and Mr. Matteson said he worries the U.S. may lose its market in China. The decline created a soybean price fall in international and domestic markets, along with a hike in supply after losing. 

    In order to prevent an oversupply of soybeans that would further reduce potential earnings, Mr. Matteson said growers had to find other markets, primarily domestic ones, to sell to, albeit at reduced prices. Mr. Robbins himself sold his crop stateside to Perdue Farms and a local company. 

    “China receives a lot of soybeans from the U.S.,” Mr. Matteson said. “It’s a significant market for U.S. soybeans, and certainly the tariffs China placed on soybeans affects their ability to import soybeans from our country.” 

    In Jefferson County alone, 60 percent of farmers grow soybeans, and of that 60 percent, 20 to 30 percent use them as a cash crop, Mr. Matteson said. Mr. Robbins coordinates soybean exports for 20 other north country farmers. 

    “Especially in New York State, a lot of soybeans are grown by dairy farmers coming off of four years of low milk prices,” he said. “Any revenue stream adds overall profitability and viability of the farm operation.” 

    The effects of the soybean tariff and trade dispute have not only trickled down to producers, but also to agribusinesses. 

    Afgritech in Watertown, which purchased some of Mr. Robbins’s inventory, processes a bypass protein called AminoMax made with soybean and canola meal and used in animal feed. General Manager Les Berghorn said the tariff its earnings. Soybean values drive affects grain prices, including canola, and a dips in soybean prices also cause increases in canola values, which raises costs. 

    Uncertainties looming over the trade dispute have also affected Afgritech’s inventory planning. Mr. Berghorn said his company typically uses 12-month projections for inventory budgeting, but instability from the trade dispute has forced him and his suppliers to focus on shorter timeframes. 

    “Nobody wants to commit to anything,” he said. “No more looking at six-to-12-month windows. Now we’re looking at 90-day windows.” 

    The harsh economic reality soybean growers faced from the trade dispute was compounded this year by excessive rainfall and cold weather that spread across the country in the spring. 

    Mr. Robbins said the inclement weather inhibited him from planting 85 percent of his projected acreage for soybeans. Many other farmers in Jefferson County were also unable to plant soybeans due to the adverse weather, Mr. Matteson said. 

    “Tariffs or no tariffs, we won’t have many soybeans to sell for 2019,” Mr. Robbins said. “Certainly, the guys weren’t eager to plant soybeans because of the price and lack of demand.” 

    Despite little reprieve from the ongoing trade war, some producers have found signs of hope. 

    Mr. Robbins said while inclement weather in the spring has hurt U.S. soybean production, an outbreak of African Swine Fever in China that reduced hog herds is expected to reduce desire for the crop, providing an opportunity for the forces of supply and demand to balance out. A strong demand for the grain will persist in domestic markets and support the industry, Mr. Robbins said, although a trade deal would “kind of be like icing on the cake.” 

    A trade deal with China is crucial for soybeans and other sectors of agriculture, Mr. Matteson said, and recent reports of efforts to continue negotiations between President Donald Trump and Chinese President Xi Jinping have given him some encouragement. 

    “The most critical thing is to get these trade negotiations over with in a very timely manner and see the market resorted,” he said.