New tariffs start today on U.S. soybeans imported to China, but Ohio farmers have already been feeling the pinch.
The price for a bushel of soybeans sank 14 percent in June and as of Friday had fallen to $8.40 a bushel on the Chicago Board of Trade, with the soybean futures market tumbling down in anticipation of the 25 percent tariffs on U.S. soybean imports.
That’s below the break even price for producing soybeans, which is about $9.70 a bushel, said Sam Custer, Darke County OSU Extension educator.
“If they don’t have soybeans sold ahead of time and if the market doesn’t come back up, you’re looking at being a dollar and a half under production cost on every bushel they produce,” Custer said.
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Ohio soybean farmers are caught in the heart of a trade war between the U.S. and China. Layers of U.S. tariffs and retaliatory Chinese tariffs are rattling markets and shifting prices of everything from crops to cars.
Soybean trade groups are putting pressure on the Trump administration to change course, but even if the tariffs are reversed some of the damage might already be done.
Ohio agricultural groups worked for decades to build up a market in China. Nearly a third of Ohio’s $2.5 billion soybean crop gets exported directly to China, but that supply chain could be disrupted by the tariffs that make U.S. soybeans more expensive than soybeans from other countries, particularly in South America.
And once competitors like Brazil move in and start supplying those buyers with soybeans at a cheaper price, it could be hard for U.S. farmers to win back those carefully built relationships, said Allen Armstrong, president of the Ohio Soybean Association.
“We could be living with those consequences three, five, seven years down the road,” said Armstrong, also a Clark County farmer. “I hope I’m wrong, but that’s my speculation.”
The tariff could drop China’s imports of soybeans by 69 percent on average. That would mean instead of a third of U.S. soybean crop being exported to China, only about a fifth would be.
For Ohio, this would account for a decrease of roughly $241 million in the value of soybean exports, according to a report from Ohio State University.
The reduction in soybean exports would initially depress world prices on average by 4.4 percent and shift soybean acreage to other commodities, including corn, the OSU report said.
Armstrong said his association agrees that something needs to be done on trade issues and accusations of China stealing U.S. intellectual property.
“We support that something needs to be done, but we don’t think tariffs are the answer to that type of negotiations,” he said.
Demand for soybeans already rises and falls based on things like the weather and supply, but this time is different because of how fast prices fell and because the change is driven by U.S. policy, said Ben Brown, author of the report, with the OSU Department of Agricultural, Environmental, and Development Economics.
“In other times, it has been out of our control,” Brown said.
For the non-farmer, while it hasn’t happened yet, the tariffs could possibly lead to a glut of soybeans in the U.S. that otherwise would have been exported and push down food prices at the grocery store, Brown said.
It will take time for the market to correct itself. The biggest threat, he said, is losing ground to other countries trading in China.
“Some of our commodity organizations worked really hard to build market share. The longer these tariffs are in place, the more we start to lose market share to these competitors.”
The crops are already out in the field and it’s too late for farmers to have made adjustments and planted more corn than soybeans, so instead they are working through their trade associations to push Washington D.C. to drop the tariffs, Custer said.
“It was President Trump through his Secretary of Agriculture who said farmers wouldn’t be held hostage on this, that the government would try to come through to help them out, but that’s yet to be seen how that could possibly happen,” Custer said.