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Farmers on China Tariffs: ‘This Isn’t Just a Chess Match’ | WSJ

November 20, 2019


When the farmer struggles, they’re not going down
and buying a new vehicle. We’re not making that purchase. And it hurts your small mom-and-pop shops, the equipment dealerships, and then that continues to be broaden. And it just continues to ripple
out and the impact trickles through other industries and economies throughout the community and state. – [Jason] American farmers are suffering. They’re caught in the
middle of a trade war between the US and China. I think they very much wanna make a deal, and the longer they wait, the
harder it is to put it back. If it can be put back at all. From 2017 to 2018, Chinese
imports of soy beans, pork, milk, and other products dropped by more than $10 billion. In the first half of this year, they’ve dropped another 20%
from the same time in 2018. We went to the Farm Progress
Show in Decatur, Illinois, where we spoke with a range of
farmers affected by tariffs. They represent some of the industries that have felt the most impact:
pork, corn, soy, and dairy. Raise your hands if you
expect your business to be profitable this year. Larry, you’re in one of the
toughest areas right now, dairy. How is it you’re profitable
when things are so difficult? He’s wicked smart. (farmers laugh) We’re diversified. We’re diversified in both the grains and in hogs and beef yet too. So while we may be loosing,
I know the numbers, but several tens of thousands of dollars on the dairy side of it, we’re making it up on our
hog side of it yet too as a contract finisher. And because we have maintained a very low debt-to-asset ratio and we are very prudent
as to what we invest in. I think there’s a general awareness that this is not the easiest time to be a farmer in this country. So for you, what is your
pain point at the moment? I think a big pain point
would just be uncertainty. We have a lot of trade deals that have kind of been opened up here and we have some major
uncertainties with trade. And farmers came through
a really challenging growing season here. We’ve lost a lot of dairy farms. In my county alone, we’ve
lost two close neighbors that basically just threw
in the towel and said, “We’re selling the cows and
getting out of business.” We’re along the Mississippi River, so for us trade is really important. American farmers in general produce a very high-quality product and we need a place for it to go. And for us, a lot of that
depends on the export markets. We know on our farm, 2/3
of our soy beans hit China, 100% of our non-GMO corn goes to Japan. And Japan’s a big market
for our beef cattle as well. And so for us, without certainty and consistency in that
market, it’s troubling. Heather, what about you? I think the most frustrating
thing, two things. We don’t have an app
to control the weather, so that is a variable that
continually can yank us around and cause a lot of heartache and stress. But secondly, those
people that we’ve elected to be our leaders need to lead. This has been a tough year? Yes. One tweet can take away decades
of relationship-building in building markets, right? But we can’t make one
week of a market rally make up for 18 to 24
months of lost revenue. When you don’t have a seed in the ground, you have nothing to market. What one word would you use to describe the challenge you’re facing right now? Unprecedented. Unprecedented? Unpredictability. It’s uncharted territory
in the business world. We’ve never have been at a point in time where we’re so reliant upon
exports to move our products, and then we find we have these
trade tariff retaliations against us that what we’re
selling our products for are at below cost-of-production levels. We’re sitting on a lot of inventory that we don’t know what
to do with right now because of all the
uncertainty in the market. Same with the pork supply. We’re going into fall,
you’ve got holiday hams. So this fall market’s a tough one to get your head wrapped around to see what we’re going
to do here in the future. The US has many trade partners. How important is trade with China? It hasn’t always been that important. I think it’s taken a
long time to get there. I mean, we’ve spent the
last two or three decades building that relationship to make them the partner they are today. When you’re looking, for
us, when we’re talking whether it’s the meat, the
protein side or the grain side, our consumer, our end user is
gonna be that middle class, so where can we build a middle class? And to date that has happened primarily we’re looking at China and Asia and where those population
growth has occurred. You build that middle class and that’s where our product’s going. So to find another China we need to build a middle class like that to scale somewhere else. You get could fit the entire population of Illinois, Indiana,
Iowa, and half of Nebraska would fit in the city of Shanghai alone. So just to see that many
people in one place, you have to wrap your head around how big the middle class is and what their demand
is for animal protein. China’s cut dramatically
the amounts of soy that they’re importing from the US. That’s from two factors. One, the African swine fever that’s reduced their hog population. They don’t need as much feed for them. They don’t need as much feed. Right now, China, its attitude
towards the United States, if I can avoid the
United States purchasing, I’m gonna buy from South America. This isn’t just a chess match that’s over whenever we
sign a deal and shake hands. There is active movement
to build infrastructure and build up capacity in
other parts of the globe, and they are willing and
ready to eat our lunch. We need three things to be
successful in the future. It’s trade, transportation,
and trust, okay? I’ll start with trust, because when you have trust
in those people who lead us. Then we need trade agreements
that we have right now that need to be ratified. The US-Mexico-Canada agreement is one. Japan seems to be on the horizon, is two. China, get it done. I’d like to build on trust. That word, trust, is paramount. When we have this political sideline here and we lose customers,
these people don’t come back just because you sign a
document and the tariff is over or ended or whatever. You have to build up trust
over many years of time. And that’s the greater concern I have too, the long-term ramifications
of this tariff retaliation. Do you think farmers are being
caught in the tug of war, especially leading up to the
presidential race of 2020? Something better get settled
before November 2020. Or what? It’s extremely complicated. It’s hard to extract just one factor. And when you ask the fight, there’s so many fights being
waged on so many fronts. If we’re just talking about
the trade renegotiation with China, it does need to happen. We have been taken
advantage of for decades. And again, to add to that complication, we’ve also had many companies
and investors in our country who have gained from that. It may be a bitter pill to swallow. I think it would be nice if
more people had to swallow it. So you feel like the farmers are taken the brunt of this trade war? I thought Wall Street–
It goes back to the fact that we can’t set our prices. So other industries
that are being impacted by these tariffs (mumbles). If were to put up a new grain
bin or buy a new trailer, a lot of those costs have gone up upwards of 20% on our cost. So those industries have a chance to pass that along to their end user. We can’t do that. President Trump just
announced a deal with Japan for the US to be exporting
more agricultural products to Japan. In the short term, it’s
really gonna be good for the livestock producer. So when we decided, we
as the United States, decided not to agree to TTP, we lost a lot of our beef market and saw an increased tariff– That’s the Trans-Pacific Partnership. Correct. We lost a lot of that to
New Zealand, Australia, and their beef market. So this is really gonna
help open up the doors to further bring in our
high-quality beef and red meats into Japan. And then like I said, our non-GMO, 100% of that ends up in Japan. And so hoping to see that
market grow and expand as well. If we can find one country to actually be able to
complete an agreement with us, it looks more favorable
for other countries to say, “Hey, we can make an agreement,
they are a trusted partner,” and hopefully we continue
to grow these markets instead of having doors shut. I want you to raise your hands for me if you’ve received a
payment from the government from the Market Facilitation Program. This is the aid that’s being offered because of the trade war. We’ve all weighed in on how
that calculation was done, with the impacts to each of our industries directly through the
trade issues with China. At least I’ve worked on that very closely through the National
Corn Growers Association and other associations that I belong to. We’ve all looked at those issues and had a direct economic figure that we can attribute
to bottom-line issues in that situation, directly attributable to China tariffs. It’s never gonna cover you fully for what we believe the
entire market loss is. I don’t expect that to happen either. But it’s a gesture that certainly helps in a struggling agreconomy right now, and I think that was
really the understanding that they tried to go
for, and also to say that, “Hey, we understand
it’s having an impact.” Dereke, do you think the president is picking the wrong fight right now? So it’s a time and a
fight question together. The fight probably is not the wrong fight, and maybe not at the same
point the wrong time. It’s taking a lot of time. 12 to 18 months to solve
something like this. I have some stayability
for a short-term fight. It’s more the long-term trend
that I’m concerned about. You want to know what we want President Trump to do for us, and I think we’d all agree that we can’t be
sustainable without trade. But there is something we
can do here domestically without fighting with another country, and that’s working with
our renewable fuels. So I say we have two ethanol
plants in our county. For us, ethanol is very important. And getting the EPA to reallocate
those gallons of ethanol is really important. For a high-octane, low-carbon
fuel source that’s affordable, you can’t beat corn ethanol. And for me, as a corn farmer
with two ethanol plants, I want that. Why should Americans be concerned about the plight of the farmer? The average consumer, the average American is three-to-four generations
removed from the farm. And it’s really easy to
not be concerned about that when you go to the grocery
store and the shelves are full and you don’t have any concern over where that’s coming from. And for me, another frustration, you talked about a tweet
or a social media post, not just from leadership
but from the average person. They see these big numbers about a Market Facilitation
payment, for instance, that comes out, or crop insurance, the support that we need
to actually survive, it becomes a negative and it looks upon that farmers
are looking for a handout or farmers are just
wanting to be on welfare, and that’s not it. I don’t think any one of us
would say that’s what we want. We want markets and free access. And feeling like we have to
fight and prove ourselves over and over again to
the average American for me is really frustrating
and disheartening. Are you optimistic about
the farming industry? Is it something you think you’d recommend young people go into? I think agriculture to me, as a fourth-generation
farmer who has two sons that are interested in farming, is that it’s like a life’s mission. It’s why you know you were
put here on this earth. This is what I’m gonna do,
I’m gonna produce food. (gentle music)

31 Comments

  • Reply Nico Prakasa November 20, 2019 at 5:01 pm

    Wow, first here

  • Reply Henrique Belini November 20, 2019 at 5:06 pm

    …it is a chess match.
    next year will be everything ok.

  • Reply Scaven X November 20, 2019 at 5:08 pm

    Feeling sorry for them, but this is necessary sacrifice. Trump is doing far from enough on making up for these farmers’ loss. Personally I blame the Chinese for breaking rules first

  • Reply Troy Dircks November 20, 2019 at 5:10 pm

    Sad to see their suffering but this is the first president to hold China accountable. We have not received a fair deal from China.They made some good points about trust though.

  • Reply Sunshyne07 Fl November 20, 2019 at 5:12 pm

    Pray dems don’t win..they want to get rid of cows, meats..save the farmers ..vote red

  • Reply HippieSkippy100 November 20, 2019 at 5:15 pm

    Trust right? No one trusts communism. There’s your answer. We eat the loss, new trade deals will happen.

  • Reply FULL FORCE November 20, 2019 at 5:17 pm

    Trump doesn't like Globalism

  • Reply Marcos Filho November 20, 2019 at 5:17 pm

    Stop using my tax dollars to bomb brown people !

  • Reply Bryn Whitehead November 20, 2019 at 5:18 pm

    Jesus Christ…
    You got subsidies.
    You want to reach China?
    Make friends across the border.

  • Reply WAN CHENG OOI November 20, 2019 at 5:23 pm

    Sorry, but you got what you voted for.

  • Reply 陈君豪 November 20, 2019 at 5:30 pm

    Is trade war really a war? Does it have to leave on side defeated and the other side win? What kind of agreement are we trying to get in the act of starting a trade war? To what extent is it fair to American people? Would that also be fair to Chinese people?

  • Reply David A. Prytula November 20, 2019 at 5:30 pm

    donnie's boss vlad is very happy that his farmers are getting many of the China contracts and many can now afford to buy american farm properties very cheap….

  • Reply CanadianImperialist November 20, 2019 at 5:31 pm

    Trump 2020

  • Reply Chi chan November 20, 2019 at 5:32 pm

    Trump is trying to destroy the dollar the Federal Reserve and the Wall Street.

  • Reply Sourish Saha November 20, 2019 at 5:33 pm

    Last time I was this early Trump was still a candidate

  • Reply Green Brain Seaside November 20, 2019 at 5:34 pm

    Somebody doesn’t like to be used as pawns, better late than never, try to fix the false consciousness.

  • Reply YoshiPeach Mario November 20, 2019 at 5:37 pm

    Us farmers are pretty clever and switched on

  • Reply T G100 November 20, 2019 at 5:43 pm

    Should we just give china all the tech so we can all become farmers.

  • Reply norpan506 November 20, 2019 at 5:43 pm

    So the gambling at Wall Street is helping them? Keeping things going?

  • Reply Aaron Burr Atwood. November 20, 2019 at 5:46 pm

    That’s just it “one tweet could kill decades of relationships”. I wonder who she’s referring to there? She even said the people they elected to lead, meaning they voted for the liar. Down with trump.

  • Reply texasgirl5787 November 20, 2019 at 5:46 pm

    You wanted Trump. Deal w/ it 😎

  • Reply Generic White Man November 20, 2019 at 5:48 pm

    They will vote for Trump again. Stupid shietes.

  • Reply Jedi Grand Master November 20, 2019 at 5:49 pm

    2:09 You can't have International Trades without Globalization.

  • Reply Z Zhang November 20, 2019 at 5:52 pm

    In a way all Americans, anti-Communist or not, should thank the Chinese Communist Party for implementing the one-child policy for 40 years. If a country of 1.4 billion consumers is already giving you this much problem, you could consider what would happen if China were at 2 billion population…

  • Reply Doug Tso November 20, 2019 at 5:53 pm

    Agriculture is part of the decoupling with the Red China. Don't be fooled by CCP:China DON'T have a middle class. DIVERSIFY‼

  • Reply Hans Gruber November 20, 2019 at 5:55 pm

    Sucks for the farmers but millions of workers and whole industries have bern moved to China because there you can demand work practices no US-citizen would accept and people are ready to work very cheap. Tariffs protect jobs and industries and if kept up long enough will bring a lot of them back if needed the state should support the farmers because in the end there is much more atstake than some farms.

  • Reply Pepe Le pew November 20, 2019 at 5:57 pm

    Sponsored by Trump

  • Reply SaciakE November 20, 2019 at 5:59 pm

    thanks for providing amazing content WSJ

  • Reply Arjun Gandhi November 20, 2019 at 6:03 pm

    They were all very well spoken and professional. I expected a lot more vitriol and frustration. Hopefully agreements are able to get in place soon

  • Reply 1stGruhn November 20, 2019 at 6:04 pm

    Markets change, business needs to adapt. China's government is a tyrannical dictatorship who's human rights abuses are as bad as North Korea, they are just better at hiding it. We shouldn't do business with them.

    And corn ethanol is stupid: its hard on engines and drops fuel economy. We should remove all subsidies and slap tariffs on any good which are subsidized by our trade partners: let a free market happen. Subsidies and forced government purchases are nothing more than market distorters: sure they help those the few that reap the higher price but it hurts everyone else.

  • Reply captaintang1 November 20, 2019 at 6:05 pm

    U asked for this, stop fking crying

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