Soybeans become part of the trade fight
Lavern Potuzak was already bracing for a hit before China announced plans to put a tariff on the crop that makes up two-thirds of his income.
“We’re always at the mercy of something,” said Potuzak, who owns a family farm in Agenda, Kan., a town of fewer than 70 people in Republic County near the Nebraska border.
China on Wednesday included soybeans, whiskey and cars on a $50 billion list of products slated for tariffs in response to President Donald Trump's plan to impose a 25 percent tariff on a range of Chinese products, including aerospace, telecoms and machinery.
The announcement immediately led to a sharp drop in soybean prices.
"You look at the big picture, you can see both sides," said Potuzak, a board member of the Kansas Farmers Union. "You knew when he started the tariffs they were going to (cause) backlash."
The threatened tariffs from China could have a major impact on the economies of Kansas and Missouri, two states that went for Trump by double digits in 2016.
Potuzak said he's not angry with Trump, but family farms in Kansas were already struggling and the drop soybean prices won't help his farm "when times are tough to begin with."
China bought 62 percent of the soybeans that the U.S. exported from 2014 to 2016, according to the U.S. Department of Agriculture.
Soybean futures dropped more than 40 cents before recovering slightly Wednesday. They bounced back more on Thursday.
“We raise about $4 billion in bushels of soybeans in the U.S. and so we just knocked a billion dollars off the value of our crop this morning,” said Blake Hurst, the president of the Missouri Farm Bureau.
Hurst owns a farm in Tarkio, and soybeans make up about half of his crop yield. Missouri ranked sixth among all states in soybean output in 2016, producing more than 270 million bushels, according to the USDA.
“We also got tariffs on cotton and a big tariff on pork, so a lot of Missouri products are getting hammered,” Hurst said.
Todd Hays, who owns a farm in Monroe City, Mo., said that the tariff on pork will hit him the hardest in the short term.
“With soybeans, we can hold it in a bin and wait until prices get better. With pork or beef, you have a live product and you can’t hold it. … Right now we’re selling everything at a loss,” said Hays, who raises pigs on top of growing 2,000 acres of soybeans and corn.
“Knowing you’re going to be selling something at a loss, that kind of weighs on you, but you’ve just got to keep pushing on,” he said.
U.S. Rep. Vicky Hartzler, a Harrisonville Republican who owns a farm and grows soybeans, raised concerns about the tariffs but stopped short of criticizing Trump.
“Farmers are hurting. They need more trade, not tariffs,” Hartzler said after a Wednesday event in Boonville, Mo.
“There’s a nervousness and a concern because prices have been down over the last several years in agriculture and we really need prices to increase," she said.. "… I don’t believe this is the last result of what the president is doing. I hope it’s just a temporary situation to get some concessions of China for some of their clear abuses in other areas.”
Beijing’s list of 106 products included the biggest U.S. exports to China, reflecting its intense sensitivity to the dispute over American complaints that it pressures foreign companies to hand over technology.
The country’s tax agency gave no date for the 25 percent increase to take effect and said it would depend on what Trump does about U.S. plans to raise duties on a similar amount of Chinese goods.
The clash reflects the tension between Trump’s promises to narrow a U.S. trade deficit with China that stood at $375.2 billion in goods last year and the ruling Communist Party’s development ambitions.
U.S. Sen. Roy Blunt, a Missouri Republican, said that he has shared his concerns about the escalating tension directly with the president.
“I’ve expressed my concerns both publicly and in the Oval Office," Blunt said during a visit to Jefferson City. "A trade war always has unintended consequences, and it’s harder to get out of than it was to get into. I think we’ve seen that in the last 48 hours.”
In a tweet after China’s announcement, Trump said: “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.”
Donn Teske, the president of the Kansas Farmers Union, said he agrees with Trump that the U.S. lost its trade war to China years ago, but he’s worried that the president’s “saber-rattling” will have dire consequences for farmers and the country as a whole.
“There has to be common sense when you’re doing trade negotiations," Teske said. "… It’s a very, very dangerous game he is playing and I hope it doesn’t lead us into a war. I mean a literal war.”
Teske, who owns a small family farm in Wheaton, Kan., said that for the last few years soybeans were “the only crop that showed potential to make a profit.”
Kansas ranked 10th among all states in soybean production in 2016, producing more than 192 million bushels.
“It seems like every time there’s a market scare, it takes the futures down and that’s what’s happening now. And that means real dollars for us on the farm,” Teske said.
Jerry Gidel, a Chicago-based analyst, said that soybean futures had dropped as much as 45 cents in the initial reaction to the possible tariffs.
By mid-afternoon it had recovered slightly, but was still a more than 20-cent drop from the previous day, said Gidel, a grain strategist for the PRICE Futures Group.
Lucas Heinen, the president of the Kansas Soybean Association and a farmer in Everest, Kan., said he sold soybeans for $10 a bushel on Tuesday.
“And today that same bushel is $9.65, $9.70,” he said. “It’s just money out of the pocket.”
He said the farmers in his association are worried about the situation but they aren’t angry at Trump for pursuing this trade strategy.
“I haven’t heard from any members about being upset with the president, but I do hear from people who say, ‘Hey we just really want to know what’s going on.’ Uncertainty breeds fear,” Heinen said.
Top Republicans in Congress raged Wednesday over retaliatory tariffs, but there’s not much they can do: Trade falls under the purview of the executive branch .
The Republican lawmakers find themselves relatively powerless as the president at the head of their own party pursues policies that are in direct conflict with the GOP's longstanding free-trade platform.
Their efforts to persuade Trump to pull back from the brink of a trade war have so far failed.
“It’s very disconcerting,” said U.S. Sen. Pat Roberts, a Kansas Republican and the chairman of the Senate Agriculture Committee. “... It’s just a very unfortunate outlook that we have protectionists advising the president and that it seems he has an intrinsic belief in protectionism.”
U.S. Sen. Claire McCaskill, a Missouri Democrat, said in a statement that she agrees with her “Republican colleagues who’ve said the Administration needs to scale back this escalating situation before it becomes a trade war that does nothing but slam some of Missouri’s most critical economic engines.”
Tom Waters, a farmer in Orrick, Mo., said that he’s trying to avoid getting too emotional as he copes with dropping soybean prices.
“First thing this morning I looked at the markets and the market was down 40 cents, so that got my attention pretty quick. … It’s a big concern for us to take a hit like that,” he said. “You’ve got to try to not panic in situations like this and hope that it’ll play out and that we’ll come out the other side in decent shape.”
Waters said he thinks China may be betting on Americans to overreact to the drop in prices. He said he’s hopeful that Trump’s plan will result in a better trade deal in the long run.
“I wish he didn’t have to do it. I think I understand why he did it … but at some point you’ve got to trust the leaders of your government, that they are making wise decisions,” Waters said.
The Associated Press and The Star's Jason Hancock and Lindsay Wise contributed to this report.