Ohio farmers are facing tough decisions as the escalating trade war with China drops the market value of crops during a potentially record harvest season for some growers.
Weather conditions this summer are expected to lead to above average yield for Southwest Ohio farmers, who are being forced to figure out how they’ll store corn and soybeans instead of selling their crops for nearly 50 percent less than they could six years ago. Caught in the crossfire of tariffs on Chinese imports and retaliatory tariffs from China, farmers are seeing several factors compounding to make this year especially challenging.
There’s been a long-term downturn in the market over the last six years, as soybean and corn prices continued to drop, said Ohio Farm Bureau spokesman Joe Cornely.
“Those are based just on normal supply and demand factors, how much are we growing and who’s buying how much,” he said. “The aberration now is the trade war with China and its impact on prices, so its exacerbating an already negative downturn.”
On average, Southwest Ohio farmers could break even at $9.25 per bushel of soybeans, said Darke County OSU Extension educator Sam Custer. But right now, they’re being offered closer to $8.50 — down about 18 percent since the end of May.
That’s why Darke County farmer Dean Thompson and his brother Kent Thompson, along with farmers across the state, plan to store as much crop as they can while waiting for prices to rebound.
“For right now, our intentions are to put them in the bin and hold onto them,” said Thompson, who farms near the small villages of Pitsburg and Arcanum.
Farming is Ohio’s number one industry, contributing $105 billion to the state’s economy. More than 14 million acres are farmed in Ohio on around 75,000 farms.
Thompson, a decades-long farmer, already has part of his crop sold ahead via contracts set at an agreed upon price that is higher than the market is offering now. Thompson also has his own grain bins, with plenty of room to store all the yield until he is ready to sell.
But other local farmers don’t have enough storage, and will have to take advantage of other options, said Clark County-based farmer Brian Harbage.
Harbage has also pre-sold some of his harvest, but most farmers only put about 50 percent of their five-year average in contracts to be certain even during a poor season they have enough harvest to meet the obligation. He will store leftover crop in his grain bins, but his expected higher than average yield still won’t all find a home in the combined bins and contracts.
“It’s just not cost prohibitive to build storage in the short term, so yes, you’re either going to have to pay the co-op facility or elevator to store it for you, pay their delayed price rates, or sell it and buy it back on the Chicago Board of Trade,” Harbage said.
He plans to do both, though he’ll weigh his options when the time comes.
Building more bins
Kevin Curry, owner of Horizon Ag Systems in Wilmington, said his company has seen many late orders come in for grain bins this year.
But if a farmer called today to order a bin, it would be the beginning of next year before Curry could install it, well past the end of the harvest season in November.
“The last five to seven years, farm storage demand has increased, and there’s only a limited number of people who build grain bins so every grain bin builder is booked,” Harbage said. He’s already talking to bin builders for extra storage he plans to add in 2019.
Curry said everybody he knows that builds bins is behind this year. Another factor impacting farmers is the cost of the grain bins as Chinese tariffs have increased the cost of steel needed to construct them.
“Not only am I trying to sell a product to a farmer that has less money to buy, but I’m trying to sell them a more expensive product,” Curry said.
Some farmers are strapped enough this year that they’re choosing to leave crops in the field longer, knowing they’ll lose some. But they’re willing to take that risk to wait for storage, he added.
Others may convert tool shops to store grain or leave corn outside covered with plastic to avoid selling at today’s rate, Custer said.
Established farmers who have plenty of storage, own their fields and haven’t recently purchased new equipment, won’t be hurt as much as the newer members of the farming community, who cash rent land and who banks will still expect to pay on loans despite the lower income during low prices, Custer said.
But even growers who saved when the market was good six to eight years ago in anticipation of a potential decline, are running out of equity after years of declining crop values, Cornely said.
U.S. farm income is expected to drop 13 percent this year, down to $66 billion, according to the Department of Agriculture. And Custer said that will affect the entire economy of the state.
One in eight jobs in Ohio are related directly to the farmer, Cornely said. Consumers won’t see their grocery bills change because of the price of crops, but their grocery stores will also suffer with agriculture-related employees spending less.
“Typically farmers, when they earn their money, they spend their money back into their immediate communities,” Custer said. “If you figure every farmer out here with less income from the sale of their products, that’s going to trickle down and affect car dealers and equipment dealers, grocery stores on down the line, so it will have an effect on everyone.”
But many farmers who are privy to the major swings of the market are optimistic that the current situation will turn around.
“In the short term, these tariffs have been terrible for us,” Harbage said. “I’m optimistic in the long run, hopefully things will work themselves out.”
Thompson also said the country will work out the trade deals, adding that this isn’t the first time farmers have been on the losing end of national and world battles.
“I really think that they’ll come back and we’ll be better off than we were before,” he said. “In other words I’m willing to weather the storm.”
But even if the trade disputes with China settle, it won’t be an easy trek for the farmers to get back in good graces with their primary importers. China buys nearly one in every three rows of U.S. soybeans.
China is already in conversations with Russia, Brazil and countries in Africa, working with them to grow soybeans the nation can import instead of American soybeans, Curry said.
“It wasn’t the U.S. government that built these markets in the first place. It was the American farmer,” Cornely said. “It took a long time. Now when you have an outside influence that offsets the value of those relationships, you run the risk of not gaining that market back.”
The U.S. Department of Agriculture has started compensating farmers for the soybean, corn and pork sales they’ve lost without China as a buyer, but most say the payments totaling up to $5 billion won’t be enough.
Nearly 45,000 farmers have applied for the aid, and about $35 million has been paid so far, according to the Wall Street Journal.
Cornely said ending the trade war and opening free trade is the first and biggest necessity for farmers, but he also wants to see the Farm Bill make it through the nation’s legislature. The bill, which offers different safety nets for farmers during volatile markets, expires today, Sept. 30, a deadline Cornely said he didn’t expect to be met late last week.
That bill would protect farmers from some market swings through commodity programs, crop insurance and trade provisions. It also contains conservation provisions that farmers need to know in order to plan out how to use their land, Cornely said.
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