‘I’d prefer they just stay out of it:’ Virginia farmers caught in the middle of trade war

Even as the trade war between the United States and China threatens to dramatically drive down the price of the nation’s top agricultural export, many Virginia soybean farmers are adopting a cautious stance of “wait and see.”

“We’re hearing from some farmers that are understandably very upset with the administration because it is affecting the prices of soybeans and other commodities,” said Virginia Farm Bureau Federation commodity marketing specialist Tony Banks. “And at the same time there are other farmers that look at it and are like, ‘They’re negotiating, and this is another factor that is leading to price uncertainty.’”

In Caroline County, Virginia’s second-largest producer of soybeans — outstripped only by Accomack County, which raised 1.2 million bushels of the crop in 2016 to Caroline’s 921,000 bushels— local Farm Bureau President Lynwood Broaddus took an even more pragmatic view.

“My concern and my focus is on things that I can do something about,” he said. “If it doesn’t rain for the next two weeks, it’s going to hurt me a lot more than this tariff will.”

The Chinese tariffs, instituted this summer in response to two successive actions by President Donald Trump’s administration to impose a 25 percent tariff on some $50 billion of Chinese goods, have hit agricultural commodities particularly hard.

The U.S. Department of Agriculture’s Economic Research Service projected in an August 2018 outlook report that agricultural exports to China would be down $7 billion this year because “soybean sales are expected to be sharply lower due to retaliatory tariffs, which also curb demand for other products.”

Those effects are already evident in soybean futures, or the contractual price companies agree to pay producers for a bushel of the crop, which have dropped significantly, from an April high of $10.60 per bushel to $8.39 at the close of Aug. 30.

And while Banks pointed out that the earlier harvest of South American soybeans compared to U.S. crops put pressure on prices in the spring, futures prices last year for soybeans still remained more than a dollar above the current level, hovering around $9.66 per bushel on Sept. 1, 2017. The Sept. 1 price was about $9.55 in 2016 and $8.91 in 2015.

In Virginia, soybeans are the seventh most -important agricultural commodity and the state’s biggest agricultural export.

And according to U.S. Department of Agriculture projections, the commonwealth’s soybean production is estimated to increase this year. The number of acres Virginia farmers have planted with soybeans has also increased, from about 600,000 in 2017 to 620,000 this year, a rise that Banks attributed to Chinese demand.

“That’s the main engine driving this,” he said, noting that this year’s projected record U.S. soybean crop is also keeping prices of the commodity low.

Still, Broaddus, who with his brother and son farms about 900 acres in Caroline, 500 of which are devoted to soybeans, said that standard operating procedure for many commodity-producing farms in the region is to divide a crop into thirds, with one-third already committed to a futures contract, one-third sold on the current market and one-third put into storage, as a way to “protect against market fluctuations.”

“We’ve already sold a good part of our crop. We’re only hurting on a part,” he said. Furthermore, he said, there appeared to be little anxiety within the local Farm Bureau community, where the tariffs are “not really something that’s much talked about.”

What effects the tariffs will ultimately have on Virginia farmers will depend largely on how China continues to respond to the United States and whether South American countries can fill China’s need for soybeans.

“It’s possible [Virginia] could see a dip in soybean acreage to switch over to some other crop next year,” said Banks. “By the same token, if South America has another challenge with their soybean crop next season, we may see soybean prices increase regardless of the tariff, because again, somebody’s got to grow the soybeans.”

The United States, for its part, has shown few signs of backing down from its tariffs on Chinese goods. During an Aug. 27 USDA press call about an initial round of assistance for farmers affected by the tariffs, USDA officials repeatedly characterized the Chinese measures as “unfair,” “retaliatory” and “illegal.”

“It’s important to note all of this could go away tomorrow, if China and the other nations simply correct their behavior,” said U.S. Secretary of Agriculture Sonny Perdue in a statement released the same day.

Though not an ardent Trump supporter, Broaddus agrees with U.S. aims to equalize trade with China, which he said was “basically sticking us every chance we get on soybeans.” He also voiced faith in the president’s ability to bring China to the negotiating table.

“Give the man a chance to negotiate,” he said. “Don’t pull the rug out from under his feet before he gets started.”

The USDA’s worry about the nation’s soybean crop was evident in its relief plan, which devoted three-quarters, or about $4.7 billion, of the roughly $6.2 billion that will be paid out in the first phase of an authorized $12 billion aid package to payments to soybean producers under the “Market Facilitation Program.” Eligible farmers will receive a payment equal to $1.65 per bushel for 50 percent of their total 2017 soybean production.

According to Banks, with the Virginia Farm Bureau Federation, Virginia soybean producers will receive an estimated $20.8 million under the program.

“I’m going to take advantage of whatever they give me,” Broaddus said. “I’d prefer if they just stay out of it. Then the playing field is level.”

Banks said Virginia farmers “want trade, not aid.”

“We just want to see the negotiations settled, and we want to get back to business,” he said. “The longer this drags out, the more it’s going to cost.”