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US-China Trade Dispute Compounds Ag Industry Headaches


China Trade Dispute Creates Headaches for US Agriculture Industry
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WATCH: China Trade Dispute Creates Headaches for US Agriculture Industry

It’s been almost two decades since Illinois farmer Scott Halpin drove a newer tractor through the fields of Grundy County.

Thankfully, as he helps pour soybean seeds into the planter that eventually will place them in the soil, the equipment his family is using is well-serviced and —so far — reliable.

Hopefully, that doesn’t change anytime soon, because Halpin says he can’t afford it.

“Not under this farm economy,” he told VOA, peering at the fields and the iconic green and yellow tractors his family owns, made in America by John Deere, headquartered in Moline, Illinois.

FILE - John Deere equipment is on display at the Farm Progress Show in Decatur, Ill., Aug. 31, 2015.
FILE - John Deere equipment is on display at the Farm Progress Show in Decatur, Ill., Aug. 31, 2015.

New equipment more expensive

John Deere saw a surge in sales and profits in the early part of 2018, but that was before aluminum and steel tariffs were imposed by the United States on China.

Now Deere, which uses steel in its equipment, plans to increase prices for 2019 models to protect profits.

That means it isn’t getting cheaper for Halpin to make a new purchase.

“The increased cost of equipment with the declining farm economy right now doesn’t make it real smart for us, or doesn’t make it what we want to do for our farming operation here,” he said.

As tensions ease somewhat over a potential trade war while negotiations continue between the U.S. and China, uncertainty remains about tariffs and the eventual impact on the U.S. agricultural industry. It’s taking a toll on U.S. farmers like Halpin, heading to the fields to plant this year’s crop. It’s also a growing concern for companies that supply the U.S. agricultural industry.

Hit from both sides

“For companies like John Deere and Caterpillar, they really get hit on both sides of the trade dispute spectrum,” said Mark Grywacheski, an investment adviser with the Quad Cities Investment Group. He explained that the cost for farmers and their suppliers to do business expands beyond the additional tariffs of 25 percent on imported steel and 10 percent on imported aluminum imposed by the U.S.

“So, if John Deere makes a routine purchase of $10 million of imported steel, they now have to cut another check for $2.5 million to the federal government, and that increases their operating costs,” Grywacheski told VOA. “On the other side, you have China threatening the U.S. with $150 billion of their own tariffs, primarily targeting the U.S. agricultural industry. Not only does that impact farmers, but it impacts those companies with ties to the farming industry.”

Ryan Roberts walks through a soy bean field to check if it is ready for harvest in Minooka, Illinois, Sept. 24, 2014. Corn and soybean prices have been depressed by concerns about trade tariffs and the increased cost of farm equipment.
Ryan Roberts walks through a soy bean field to check if it is ready for harvest in Minooka, Illinois, Sept. 24, 2014. Corn and soybean prices have been depressed by concerns about trade tariffs and the increased cost of farm equipment.

A daily effect

Increased cost for farm equipment and concerns about competitive access to a big market like China, which has depressed prices for corn and soybeans, is creating the perfect economic storm for farmers like the Halpins.

“The decline in the market has a daily effect on every farm in this country.” Halpin said the relentless news about renegotiating trade deals and tariffs also has a “daily effect” and what he wants most, almost as much as favorable weather this year for his crops, is some sense of stability.

“With the negotiations the way they’re happening, it can hurt when things happen on a daily basis. It’s just kind of uncertain times here in farming,” he noted.

It’s a time when, even before new tariffs, the U.S. Agriculture Department projected net farm income in 2018 to reach a 12-year low.

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    Kane Farabaugh

    Kane Farabaugh is the Midwest Correspondent for Voice of America, where since 2008 he has established Voice of America's presence in the heartland of America.

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