Soybeans Singled Out In U.S.-China Trade War, But Small Farmers Bear The Brunt
In theory, closing off China’s soybean market due to the trade dispute with the U.S. on top of generally low prices for the commodity should affect all industry players, big to small. Agriculture economist Pat Westhoff begged to differ.
“The impact on total revenue may be very similar across the scale of production,” according to Westhoff, who’s an ag economics professor at the University of Missouri. “But sometimes the effect on net revenue can be very different. So a given price that may be difficult for a large producer can be catastrophic for a small producer.”
In other words, if you’re a farmer who plants only soybeans on relatively few acres, you’re probably in trouble.
Large agribusinesses have worldwide sources and markets in lots of countries, and even medium-sized farmers in the U.S. have diversified enough to stay afloat.
That’s the case for Robert Alpers, a farmer in the central Missouri town of Prairie Home. He farms 4,000 acres, about half soybeans, half corn. But his family also has a 550-head cattle operation and a side business of making and fixing farm necessities equipment like feeding troughs and livestock gates.
The trade war and subsequent rough soybean market has had a negative impact on his family, but those other sources of income and the size of his operation has mitigated some of the pain.
“Our family’s fortunate enough, we’ve got over 300,000 bushels of storage,” Alpers said while taking a break from tending to newborn calves. “So we’re able to hold our crop for a better price. We’ve got livestock, and the corn market has moved up a little, so we have moved some corn on the cash market.”
Alpers said between diversification and the tariff bailout payments from the U.S. Department of Agriculture, he’s in a good spot, but most of his friends and neighbors aren’t as lucky.
They’ll have to make some difficult decisions this year, he said, because farmers don’t suddenly go bankrupt. They start cutting, borrowing more and eventually get in over their heads. And the low prices and lack of market access due to the tariffs are the kind of thing that can get that ball rolling.
Even with his storage, cattle business and corn crop, Alpers said if there’s another round tariffs, he’ll be forced to make tough decisions. But it won’t sink him.
“This farm has been in my family for almost a century. And we have plans to keep that going,” he said.
Protected by a global reach
Alpers also knows that large agribusinesses, the ones that buy, sell and process soybeans, will be fine.
“The CEOs of the big companies, they’re not sitting there in their offices twiddling their thumbs,” he said, “they’re trying to move product, somewhere.”
Cargill, Archer Daniels Midland, Bayer and even CropLife America, the trade group that represents the industry, declined Harvest Public Media’s requests to comment.
But Cargill CEO David MacLennan told Yahoo Finance in late January that the company has “had to shift supply chains from North America to South America” — buying instead soybeans from Brazil and Argentina.
Those places, Westhoff noted, aren’t in a trade war with China, and are markets that the multinational corporations already work in.
“South American soybeans are going to be capturing a premium in the Chinese market than would they would have had, had it not been for the tariffs,” he said.
Large agribusiness companies are lobbying the Trump administration for an end to the trade war so U.S. soybeans can fully return to the Chinese market. Cargill’s MacLennan specifically said in an January interview with Bloomberg that it’s in his company’s best interests to protect North American farmers.
But as the tariffs continue, how long anyone in the soybean business will be able to last depends on how big they are.
Follow Jonathan on Twitter: @JonathanAhl