Little bean, big stress: Chinese soybean tariff worries local farmers
The threat of Chinese tariffs against U.S. soybeans might not be so bad for Douglas County farmers if only the weather weren't so darn cold.
Persistent wintry weather could spell trouble for wheat, which is best planted in April, and force farmers to turn more to soybeans, which can be planted into mid-June.
That could make local growers more vulnerable to tariff-inflicted price drops, adding to the headaches of farmers like John Ledermann of Brandon, who grows soybeans, corn and wheat.
"It definitely makes me nervous," Ledermann said in a phone interview Monday.
Soybeans have become an increasingly popular crop locally. In 2017, Douglas County farmers planted 73,400 acres of soybeans, according to the USDA's National Agricultural Statistics Service. Ten years earlier, they had planted 59,100 acres.
China is the biggest buyer of U.S. soybeans, which it feeds to hogs. But the country can also buy from Brazil, which grows almost as many soybeans as the U.S. and has seen good production this year. China says it will add 25 percent to the cost of U.S. soybeans to retaliate against U.S. tariffs against Chinese products, which will likely send Chinese buyers to Brazilian soybeans.
That leaves local farmers weighing their options at the brink of planting season. Should they lock in today's prices with contracts? Should they unload last year's beans? Will the tariffs even materialize?
This time of year is usually quiet for soybeans, said Tim Lauthen, who manages the Pro-Ag elevator in Brandon and is also its grain merchandiser. However, the elevator has seen a flurry of buying because of the tariffs and because Argentina — another larger soybean producer — has seen poorer yields.
"I would say that us as a commercial elevator have been a little more aggressive in getting our old soybeans sold, what we have on hand," he said. "There's really good demand this winter and with some of the demand shift from Argentina to U.S. beans, that's really helped us."
Many farmers have signed contracts for part of their 2018 soybean crops through the local elevator.
That might seem to leave the elevator on the hook if U.S. soybean prices plummet, but Lauthen exudes confidence. The elevator is still signing contracts for 2018 soybeans at good prices, he said.
"They need to buy some beans from us," he said. "They can cut back a little but only so much because they'll impact hog production in China. There's only so much they can do or people will get hungry. Communist leaders don't want anyone to get hungry because it can lead to a revolt."
Lauthen thinks the trade tussles will force China to make concessions.
Russ Elliott, president of the Douglas County Corn & Soybean Growers, did not sound so positive, citing the suffering caused by low crop prices in recent years.
"There's a lot of financial stress on farms right now," he said. "The ag market's financially struggling right now and it's difficult to add this one more struggle."
Farmers have been gritting their teeth and taking on more debt for several years, he said.
"That's why we're really nervous about where this is going to go," he said.
Meanwhile, Jim Emter, CEO of Alexandria-based commodities investment consultant Van Ahn and Company, said the tariffs could affect local growers but that China will still have to rely on U.S. soybeans eventually.
"Brazil has ample supplies and the tendency is for most of China's demand to shift to Brazil the next four months anyways," he said. Even if the tariffs materialize, Emter predicted that by this fall, China will need beans from the United States.