The roller-coaster ride that has come to represent U.S. trade likely will continue its carnival run for the foreseeable future.
That ride is making farmers more than a little queasy, said Dermot Hayes, an ag economist with Iowa State University.
“It’s pretty chaotic right now,” he said.
The tariff tussle between President Donald Trump and importers of U.S. ag products has put a severe dent in most farmers’ bottom line, Hayes said.
“Soybean prices are down $1.75 a bushel due to the tariff issue with China,” he said, adding corn prices are taking a hit of about 50 cents per bushel and hog prices are down $18 to $20 per head.
Hayes said new tariffs from Mexico and Canada are also costing U.S. farmers money.
Mexico purchases roughly 10 percent of the pork produced in the U.S., Hayes said. That includes 60 percent of the hams and a large amount of variety meats.
“There aren’t many other places we can send those hams,” he said, adding the trade war is likely to halt the current expansion of the pork industry.
Hayes said a $12 billion aid package recently announced for farmers will help some, but adds there are limits to how much aid is available to individual producers.
Trump recently announced an agreement had been reached with the European Union regarding soybean imports. Hayes said the EU will not become a large importer of U.S. soybeans with its ban on most genetically modified grains.
“The percentage of non-GMO crops grown here is tiny,” he said.
He said China will feel pressure to buy U.S. beans.
“But, we are going to have to pay the duty for that to happen,” he said. “Our beans are discounted to Brazilian soybeans like U.S. pork is discounted compared to Canadian pork.”
There have been recent rumblings that negotiations on NAFTA will be completed soon, which should be good news to farmers, Hayes said.
“Iowa and other states have been sitting pretty with NAFTA as it was originally written,” he said. “It’s going to be pretty difficult to improve on complete access.”
Hayes said the 25 percent tariff for U.S. pork exports into China will cost producers “hundreds of millions” of dollars. He said many producers had already hedged market prices ahead of the tariff announcement, reducing potential losses.
“Hog producers have been making money for a while, so they should be able to handle six months or so of lower prices,” Hayes said.
He said U.S. pork prices remain extremely competitive globally, which should help export volume.
According to the U.S. Meat Export Federation, May exports to China/Hong Kong were down 31 percent from a year ago, with export values dropping by 25 percent. Those figures were down 18 percent in the January through May period.
“Exports to China will face an even steeper challenge in the second half of 2018, as China recently hiked the duty rate on U.S. pork by another 25 percent,” USMEF president Dan Halstrom said in a news release.
“This means U.S. pork cuts and pork variety meat entering China now face a duty rate of 62 percent, compared to 12 percent for China’s other suppliers, including the European Union, Brazil and Canada. It is unfortunate that U.S. pork is caught in the crosshairs of a dispute that has nothing to do with pork trade.”
Tariffs placed on some U.S. beef by Canada have not had a major impact yet, Hayes said. China has not purchased large amounts of U.S. beef since ending a lengthy ban last year.
This comes as May beef exports set a value record and numbers jumped by 24 percent from a year ago, according to the USMEF. May exports to China were the highest since the market for U.S. beef reopened in June 2017.
Tariffs on U.S. dairy products are also in place. According to the National Milk Producers Federation, tariffs from Mexico, China and other countries will cost dairy producers $1.8 billion through the end of the year, based on lower milk futures prices since the tariffs were announced this summer.