RIPPEY, Iowa — Tim Bardole is still upbeat.
“I really think this China situation is going to come to a resolution,” says the central Iowa farmer, who serves as president of the Iowa Soybean Association. “I’m more hopeful now than I was a few weeks ago.”
But when it comes to trade, not everyone shares his optimism.
“China is kind of a disaster for us,” says Iowa State University ag economist Dermot Hayes.
The problem is not just the political discussion or the tariffs, Hayes says. It goes back to the way the trade war started and has unfolded.
President Donald Trump’s “in-your-face approach” to trade has offended many in China. In talking to people from that country, he says, he has been struck by how angry many of them are.
“They feel like this is Pearl Harbor for them,” he says. “Once you start thinking like that, logic goes out the window.”
If that attitude is widespread, it means reaching an agreement may be very difficult and any impasse may last beyond 2020 or even the 2024 elections.
The situation is better for livestock producers, says Joe Schuele, vice president of communications at the U.S. Meat Export Federation. Coming into 2019, many expected pork exports to China to increase dramatically due to the outbreak of African swine fever and the liquidation of China’s swine population. Since China is far and away the largest producer and user of pork, that is a big deal.
But Schuele says the outbreak led to more pork hitting the market at first, as some producers sold earlier than normal or liquidated herds before they could get hit with the disease. It was not until summer that the shortage began to show up.
“That pork shortage didn’t really materialize as quickly as people thought,” he says.
The shortage did eventually show up. In July, pork exports from the United States surged to 32% above the previous July. That uptick was due to several factors. One was the need for pork in China. Another was the fact that in May, Mexico eliminated tariffs it had put in place during a trade war with the U.S.
Schuele says most analysts expect the United States to eventually approve the United States-Mexico-Canada Agreement (USMCA), which is essentially an updated version of the North American Free Trade Agreement (NAFTA). While politicians can debate whether the improved USMCA is worth the year-long trade war that led to it is another matter, but most agricultural trade groups support its approval and implementation.
Beef exports are also doing well this summer and fall, Schuele says. Last year was a record year with $8.3 billion in beef exports from the United States. This year that figure is holding steady. The tentative agreement with Japan announced a few weeks ago should help beef exports.
The South Korean beef market is also growing, and sales to that nation could reach close to $2 billion this year, which would break the record set last year.
The Japanese agreement is one of several negotiators are pursuing that would essentially put the United States on par with other nations which have already signed on to the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) — similar to the TPP, which was negotiated by the Obama administration but which the United States failed to approve after Obama left office.
When it comes to grain, the situation is a bit different. Because of the African swine fever epidemic in China, U.S. soybean shipments for feed to that nation were inevitably going to drop, but the trade war added to that problem, Hayes says.
The hope is the trade dispute will be settled soon. It appears the rhetoric has been toned down in recent weeks, and Bardole says he hopes that is a good sign.
He also says he is hopeful Congress will approve the USMCA this fall. It would not provide a big boost to the grain market, but it would help dairy producers. It would certainly help farmers feel a bit better about their futures, he says.
“If we get that signed and put into place, that could build momentum,” Bardole says.
In the meantime, farmers are getting Market Facilitation Program (MFP) payments to help offset some of the losses caused by the various trade disputes, especially the one with China.
“I don’t like those,” Bardole says of the MFP, “but I’m not going to turn them down.”
Of course, he adds, he really does not have a choice whether to accept the MFP because his banker would be having a very serious conversation with him if that were to happen.
This all leads back to that financial situation, Bardole and Hayes both say. Farmers were already facing difficult times before the trade wars of the past three years. The disputes — along with the related battle regarding refinery exemptions and ethanol production — have added significantly to the financial stress on the farm.
Right now, Hayes says, the best farmers can likely hope for is for the bleeding to stop. Some markets have already been lost forever, he says. There is hope on the livestock front. But there is a lot of concern on the crop side of things.