Farm leaders testify tariffs hurt sales, raise input costs
July 24, 2018
A panel of farm leaders told the House Ways and Means Trade Subcommittee on Thursday that the steel and aluminum tariffs imposed by the Trump administration have led to retaliatory tariffs that make U.S. farm products more expensive overseas and also raise the cost of imported farm inputs.
Cass Gebbers, a farmer from Brewster, Wash., representing the Northwest Horticulture Council, said that he and other farmers in the Pacific Northwest are worried about losing apple, pear and cherry sales to China because the tariffs make U.S. products more expensive, and also that the Chinese may use phytosanitary inspections to slow down deliveries that would allow fruit to rot.
"If the tariffs remain in place for the 2019 crop, buyers in China will look to secure supply from other origins such as the European Union or Turkey," Gebbers said. "Now we will be opening the door to all of our competitors who also grow cherries elsewhere in the world, who will snatch up these markets as soon as we stumble!"
Texas Farm Bureau President Russell Boening noted that a wide variety of agricultural products are on these retaliation lists, including pork, apples, potatoes, rice, orange juice and cheeses.
"While agriculture is bearing the brunt of retaliation for things that have absolutely nothing to do with our industry, it's not unfamiliar territory," Boening said.
"In fact, for years the agricultural community has been highlighting the egregious tariff and non-tariff trade barriers being erected by our trading partners. So, while we have serious concerns about the retaliation we are facing, I must also commend President Trump and his administration for working to address problems that have existed for decades."
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Minnesota Farm Bureau President Kevin Paap said, "In trade wars, agriculture has been and continues to be the tip of the spear. All commodities are being impacted, but in Minnesota we are hearing the most from our members that are growing soybeans and raising pigs. The impact tariffs are having on prices and on our farms is what is keeping farmers up at night."
Paap continued, "Agricultural exports are important economic drivers. Once you lose a market, it is really tough to get it back."
"In 2017, we exported $140 billion in farm products, which is $21 billion more farm products than we imported. We cannot afford to lose our place as a leader in the agricultural global marketplace. President Trump often talks about our need to export more things that we make, but from a rural America perspective, we also need to export more of the things we grow."
South Dakota Farm Bureau Vice President Scott VanderWal said, "We urge the administration and Congress to work to resolve trade imbalances through negotiations, not tariffs or FTA withdrawals that harm agriculture. "
"I am hearing more from farmers as time goes along that they still trust that President Trump knows what he's doing and everything will be fine in the end. We understand that other countries, particularly China, have not played fairly, and we respect his desire to remedy those situations. The problem is, those countries know just where to punch us back in a dispute by targeting our agriculture products. Through no fault of our own, and unintentionally, our industry
ends up being used for leverage.
"Patience is running out as we get closer to the main selling season. As of July 13, since the end of May, new crop soybean futures prices have dropped $2.20 per bushel and corn has dropped $0.70 per bushel. The markets react daily to the trade war and tariff news, and if sales have to be made at these price levels, this whole issue will show up as a massive shortfall in expected income on our financial statements.
"Specifically, for our small farm, for just corn and soybeans, this amounts to a negative impact of $160,000 on our income statement. Farmers and ranchers are among the most patriotic people in the country, but going bankrupt should not be a consequence of that dedication.
"I want to make it crystal clear that we appreciate many of President Trump's efforts so far, such as reducing unnecessary regulations and taking a more conservative approach to the issues that affect our industry most. However, he also needs to know that the agriculture industry has not shared in the current economic uptrend and reductions in income due to long term trade disputes only make matters worse.
"We must ask, what is the exact goal? What is the exit strategy? If we knew this would all be over within a few months, we could hang in there and manage around it. Obviously, none of us know the time frame and that uncertainty is very detrimental."
Michelle Erickson-Jones, a farmer and rancher from Broadview, Mont., who is the president of the Montana Grain Growers Association, on the board of the National Association of Wheat Growers, and a member of Farmers for Free Trade, said that in addition to hurting the exports of farm products the steel and aluminum tariffs have increased the cost of items such as grain bins.
"The first wave started at the time the administration imposed tariffs on steel and aluminum," Erickson-Jones said.
"For example, earlier this year we priced a new 25,000-bushel grain bin to increase grain storage capacity on our farm. The price was 12 percent higher than an identical bin we had built in 2017. As we weighed our options, the bid on bin #2 expired, so we sought a second bid. This bid was 8 percent higher than the one we received just a few weeks prior — a 20 percent increase total in the cost of the same steel product in just one year.
"The bin company attributed the difference in the final bin cost to a significant increase in their cost of steel. I learned that their domestically sourced steel suppliers had increased their prices to match the price of imported steel which was subject to an additional 25 percent duty when imported.
"As a result of this dramatic cost increase and volatility in the market, we abandoned our grain storage expansion project. The implications of that decision not only harmed my operation, it also hurt my community: a small local construction company lost a project, a U.S. grain bin company missed a sale, and a domestic steel company had one less shipment to send out of their factory.
"Currently farmers like me are not only struggling to ensure this year's crop is profitable, but we are also concerned about the long-term impacts to our valuable export markets," Erickson-Jones concluded.
"For young and beginning farmers like me the stakes are even higher. We are often highly leveraged, just establishing our operations, as well trying to ensure we have access to enough capital to successfully grow our operations. Increased trade tensions and market uncertainty makes our path forward and our hopes to pass the farm on to our sons less clear."
–The Hagstrom Report