WJ Editorial

Trade Uncertainty Has Ripples, Too

At the recently concluded Inland Marine Expo, Mike Steenhoek, executive director of the Soy Transportation Coalition (STC), spoke eloquently about the importance of transportation networks—especially water transport networks—to soy farmers. The STC is one of the invaluable farm-based partners of the barge industry that amplify and extend its message in Washington.

Farmers are in the middle of tough times right now. According to the U.S. Department of Agriculture (USDA), net farm income has fallen by 50 percent over the past four years. The USDA is predicting crop revenues for 2018 to drop 0.8 percent to $188.2 billion. Earlier this year, it predicted that farm profits could shrink 6.7 percent to $59.5 billion, the lowest they have been since 2006. Revenues from livestock and related products are expected to decline 0.3 percent to $174.9 billion.

Steenhoek correctly pointed out that the ag industry has ripples that extend throughout the U.S. economy. The same is true of trade uncertainty. Steenhoek mentioned the deep disappointment that many farmers had about President Trump’s trade policies so far.

In April, Soren Schroder, the CEO of global ag trader Bunge Corporation, noted that U.S. soybean sales to China temporarily halted in April in response to just the threat of Chinese tariffs, which could amount to a $100 per ton penalty. “Nobody’s willing to take the risk of committing to U.S. soybeans to China in the current context, knowing that there could be a $100 penalty from one day to the other, and no way of managing that risk,” he said in a conference call after Bunge reported a quarterly loss.

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Many farmers took Trump at his word when he said he wanted to restore America’s trade position and correct imbalances. Now they feel they are being made to pay the price for disputes about steel, aluminum, electronics and intellectual property that have nothing to do with them.

So far, the biggest beneficiaries of Trump’s trade swings have been Brazil and Canada. Both those countries have seen grain orders from China boosted. This could be partly signaling by China; Brazil’s harvest season happens in the spring. Mexico is also sourcing more grain from other producers as it hedges against Trump’s rhetoric about revoking NAFTA.

Some sources point out that with world demand rising, U.S. farmers will always find some export outlet for their crops, even if at lower prices and volumes. In that case, barge loads would continue to move downriver, and barge companies would still get paid. But it is not good for the barge industry long-term if farmers must continue to take hits and to “eat” transportation costs.

Even in the best of times, farming is affected by many conditions beyond farmers’ control. They don’t need the added uncertainty of erratic trade policies.