Picture: 123RF/KOSTIC DUSAN
Picture: 123RF/KOSTIC DUSAN

Washington/Chicago — President Donald Trump’s trade disputes with China, Mexico and Canada are already eroding the value of American agricultural production, with soybean growers alone expected to lose at least $3.2bn during the next crop season.

But many farmers — including some whose incomes are plunging as exports stall — are sticking by the man they helped vote into office.

They’d just like him to win the trade war quickly, before the fall harvest starts compounding the problem in a couple of months — when congressional midterm elections also will be heating up.

"President Trump is a businessman," says 57-year-old John King, who raises soybeans, maize and rice with his father and nephew outside Helena, Arkansas, about 160km east of Little Rock. "He’s making a high-risk business decision that probably should have been made a long time ago. But it’s definitely a risk."

Agriculture is the third-biggest US export industry and a global juggernaut that has generated six decades of trade surpluses. It has also become a flash point in tariff battles with China, which bought $12bn of soybeans last year and now is shifting to supplies from South America.

Separate duties are affecting sales to Canada and Mexico, which are renegotiating the North American Free Trade Agreement with the US.

Trump’s trade policies already are changing the outlook for US exports and farmer income, mostly because China, Mexico and Canada accounted for 43% of American farm exports last year.

The US Department of Agriculture on Thursday predicted domestic soybean stockpiles will be 51% larger than expected a month earlier and cut its export forecast by 11%.

The department also reduced its price forecast by 75c a bushel, citing reduced purchases by China, the top importer. That amounts to almost $3.2bn in lost revenue based on the government’s use estimate.

While the situation could get worse if the trade war escalates, the president has urged patience.

"Always thinking about our farmers," Trump said via tweet from the Nato summit in Brussels last week. "Other countries’ trade barriers and tariffs have been destroying" US farm businesses, he said.

"I will open things up, better than ever before, but it can’t go too quickly. I am fighting for a level playing field for our farmers, and will win!"

To be sure, farmers were big winners until recently. High commodity prices led to record net income of $123.8bn in 2013, before a global glut sent markets tumbling.

This year’s projected net income of $59.5bn would be the lowest since 2006, and the average farm business will suffer a 7% drop in 2018, to $339,300, compared with $437,400 in 2013, department data show. The country would still have an agricultural trade surplus of $21bn.

Because the US exports almost a third of its agricultural production, the industry is a logical target for foreign retaliation. It’s also a key group among voters in rural counties that gave Trump 60% of the vote in the 2016 election. That, in theory, gives trade rivals an opportunity to inflict damage on his political base.

Hurting sales

Groups representing crop and livestock producers have warned that their industries would be hurt by reduced exports at a time when they already face big inventories and lower prices.

"America’s farmers and families are staring down a dark path, with no signs of relief in sight," Casey Guernsey, a spokesman for Americans for Farmers and Families, a group of crop and meat producers formed to protect Nafta, said in a statement on July 6, when China’s retaliatory duties went into effect.

For farmers, the timing is terrible. By September or October, many will need to have unloaded inventories from last year to make room for this season’s harvest.

King, the Arkansas grower, says he sold about 60% of last year’s soybeans for about $10 a bushel. That is nowhere near the record of more than $17 in 2012, but it is decent compared with about $8 now. King says he cannot hold onto his remaining inventory once he starts collecting this year’s crop.

The slumping market hasn’t dimmed support for Trump among some farmers.

"The one thing I admire about the guy is that he’s fulfilled or tried to fulfil" his campaign promises, says David Durham, who grows maize and soybeans about 65km east of Kansas City, Missouri. "In the long run, this could benefit us" by opening the world to more buyers of US farm goods, said Durham, a fourth-generation farmer who estimates his crop revenue has been cut in half since rumbles of a trade war began earlier this year.

Chad Hart, an agricultural economist at Iowa State University in Ames, Iowa, says support for Trump’s actions may boil down to who is most willing and able to ride out the storm. Farmers "are comfortable with the objectives President Trump has laid out", Hart says. "I don’t think anyone’s considered that they’d change their vote."

Wavering?

That doesn’t mean Trump isn’t losing some votes. The president’s net approval rating in monthly surveys by polling company Morning Consult has fallen almost as much in deep-red, agriculture-heavy states such as Kentucky (down 21%), Montana (21%) and Oklahoma (25%), as it has in the bright blue coastal states of California (15%) and Massachusetts (22%).

And farmers say they’d rather the trade conflict end sooner rather than later.

Don Borgman, a third-generation maize and soybean grower from Buckner, Missouri, says he’s been "hammered" by lower prices but is "refreshed" by Trump’s get-tough approach. The president "is in negotiating mode". Still, Borgman says he’d be more concerned "if I thought our president was starting a decades-long trade war".

Trade impacts on agriculture would have to be truly catastrophic for farmers to turn on the White House, though some defections on the margins could be significant in specific political campaigns, says Harwood Schaffer, a professor of agricultural policy at the University of Tennessee in Knoxville.

At least for now, support for Trump persists among farmers who have "concern and some worry" about where trade may be heading, says Will Rodger, spokesman for Farm Bureau in Washington. "Donald Trump is president of the United States and he’s the man many of them voted for," Rodger says. "It’s not panic."

That’s King’s approach. Farmers understand why they’re taking a hit, the Arkansas grower says. But if it lasts too long, some may feel the need to re-evaluate the president’s wisdom.

"Time will tell," King says. "Let’s see what price I get for the last 40% of my soybeans."

Bloomberg