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Tariffs creating uncertainty in the agricultural market

 

August 15, 2018

Havre Daily News/Ryan Welch

A combine harvests wheat in Kremlin Tuesday

Editor's note: Watch for additional coverage on this topic in the September Farm and Ranch section of the Havre Daily News.

People are worried about the impact that retaliatory tariffs being imposed on U.S. by trading partners will have on agriculture in Montana, although experts say what the impact will be is still unknown.

Some farmers and ranchers are nervous about the future of the industry, although some remain hopeful the market will eventually be profitable and stable, said Associate Professor of Economics Anton Bekkerman of the Department of Agricultural Economics and Economics at Montana State University Bozeman.

"If I was going to use one word to characterize it, it's uncertainty," Bekkerman said. "A lot of it is due to the fact that the tariffs are creating uncertainty."

All over the country in the past months the agricultural market and the tariffs imposed by President Donald Trump's administration have been a concern for many in the agricultural community. Some believe that the tariffs are only a short-term setback for the market, while others fear it will hurt the industry indefinitely, Bekkerman said.

Reports from around the nation show farmers' and ranchers' fears.

Associated Press reported Aug. 8 that during the Farmfest trade show in southwest Minnesota, discussions about the tariffs and the financial impact on farmers was a primary focus.

"Many farmers said they see the need for better trade deals but are concerned about the financial impact that many are already feeling," the article said.

The Associated Press reported Aug. 13 that in Charleston, South Carolina, farmers who grow soybeans are worried about the uncertainty surrounding the trade conflict between the United States and China, with China having a large market for soybeans.

The current price per bushel for soybeans is $8.94, resulting in some farmers losing $80,000 in annual profit compared to last year, the article said.

Professor of Economics Vincent Smith at MSU's Department of Agricultural Economics and Economics said that the impact depends on what market is being looked at and when it is examined.

These things are rarely as simple as people want them to be, Smith said, adding that over the past two weeks soybean prices have risen to the highest level this year.

Bekkerman said the tariffs are certainly disrupting the flow of supply chain that has been established over the past decades.

There is no single answer to satisfy the question of what could happen to the market, Bekkerman said.

He said that some ag producers, though, may feel minimum effects from the drop in the market because they had locked in prices by establishing forward contracts prior to the trade dispute. Bekkerman added that the market has "tanked" over the past two months.

The NAFTA negotiations progressing with Mexico, Bekkerman said, is a positive thing because the country is a large market for Montana producers. Although, once Canada re-enters negotiations the effects are uncertain.

Bekkerman said 50 percent tariffs India has established with the United States have had a significant effect on the market for chickpeas, lentils and peas. This is troubling for the market, he added, because India has been the third-largest market for all U.S. exports for around a decade.

The prices on those products still have not recovered, he said.

"When you see that high of a tax, which tariffs basically is, on U.S. products, it really affects demand," Bekkerman said, adding because of the uncertainty in the market he has no projections for Montana agriculture.

Smith said that the impact depends on what market is being looked at.

Drops in market are not uniform and are uncertain until the sale date, he said, adding that there are many factors that go into pricing, aside from tariffs and markets.

He added that the concern with tariffs is fracturing business relationships.

University of Montana Bureau of Business and Economic Research Director Emeritus Paul Polzin said that, right now, the railroad and agriculture are tied as the top economic factors in Hill County. Impacts on agriculture has huge impact of the local economy, he said.

He added that the projections by the bureau show statewide economic growth will be slightly slower in the upcoming year.

The Hill, a Washington, D.C., newspaper, published an article Aug. 14 about U.S. crop export prices falling at the steepest rate since 2011.

Havre Daily News/Ryan Welch

The price drop was led by a 14.1 percent decrease in soybean prices and export prices for corn, nuts, wheat and fruits also falling in July, the article said, adding that these changes are likely due to the tariffs imposed by China, Canada, Mexico and the European Union.

The article said agricultural export prices have decreased in the past year while overall export prices rose.

Trump in July announced a $12 billion aid package through the U.S. Department of Agriculture for agriculture producers to offset impacts of tariffs. He also announced an agreement with the European Union to export more soybean, the article said, adding that Trump still remains adamant that the farmers will be benefited in the long term.

 

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