Low prices, trade disputes sow fears of '80s-style farm crisis

Donnelle Eller | The Des Moines Register

Show Caption Hide Caption As planting season ends in Iowa, tariffs and RFS changes loom Possible changes to the Renewable Fuel Standard is just one of the issues famers face as they wrap up spring planting season.

Iowa farmers, battling too much rain, cold — and even snow — this planting season, have a new crop of concerns that could devastate commodity prices:

An escalating U.S.-China trade war that's sparked tariffs on pork and, potentially, soybeans.

Trade negotiations with Canada and Mexico that exploded last week following U.S. tariffs on steel imports.

EPA ethanol waivers for oil refiners that undermine demand for ethanol and corn.

And divisions over a new farm bill intended to provide protection to farmers.

"There are a lot of stresses for farmers — more than we’ve had in a long while," said Tim Bardole, who farms near Rippey in central Iowa.

Every headline brings new worries — and swings in commodity prices, said Mark Recker, a northeast Iowa farmer.

"One day, it's NAFTA negotiations … The next, it's what Scott Pruitt at EPA is doing on ethanol waivers or trade negotiations with China," said Recker, president of the Iowa Corn Growers Association board.

"It influences the market day-to-day, but we're also concerned about the long-term impact" of the possibility of U.S. producers losing export markets to South America and other competitors, he said.

Corn, soybeans, pork and beef, along with ethanol and biodiesel, are major Iowa farm exports.

In retaliation for U.S. tariffs on steel, aluminum and other products:

China , a top U.S. pork and soybean customer, is threatening a 25 percent duty on soybeans. It's already imposed an additional 25 percent tariff on pork.

, a top U.S. pork and soybean customer, is threatening a 25 percent duty on soybeans. It's already imposed an additional 25 percent tariff on pork. Mexico is threatening a 20 percent pork tax.

is threatening a 20 percent pork tax. And Canada and the European Union are looking to levy tariffs on U.S. steel, whiskey and other products.

China's tariffs on U.S. pork alone have cost Iowa producers about $560 million, according to an Iowa State University estimate.

The threat of Chinese tariffs on soybeans is "a big deal," said Chad Hart, an Iowa State University economist.

"They can have a big impact," he said. "It would filter down to producers quite quickly."

"It doesn't shut that market down," but it does "slow it down."

'It would push farmers below break-even'

China warned Sunday that U.S. tariffs could end trade concessions, including commitments to increase its purchases of U.S. farm, energy and other goods.

President Donald Trump has vowed to close the U.S. trade gap with China, Mexico and other countries. For example, China sells $375 billion more in goods to Americans than it buys; with Mexico, that gap is $71 billion.

Last week, Trump pushed ahead with tariffs on steel from Canada, Mexico and Europe. And the president said he would pursue tariffs on $50 billion in high-tech Chinese goods.

Trump is also looking for tariffs on another $100 billion of Chinese products.

Hart said Chinese soybean tariffs could cut 10 percent, or a $1 per bushel, from current prices.

That would mean another $560 million revenue hit for Iowa farmers, based on last year's soybean production.

It's more bad news for Iowa farmers already struggling to post a profit. Iowa farm income dropped nearly 75 percent to $2.5 billion in 2016 from a high in 2011.

"It would push farmers below break-even," Hart said.

He calculates Iowa farmers need prices of around $3.60 a bushel for corn and $9.60 for soybeans just to cover production costs.

Corn prices for December delivery Monday hovered around $3.60 a bushel at Iowa elevators; soybeans were at $9.40. Many farmers sell their crops throughout the year to capture profits.

"Those who get hurt are U.S. producers and Chinese consumers," who will pay more for U.S. farm goods, Hart said.

Further exacerbating worries, U.S. lawmakers have struggled to agree on a new farm bill, with a House bill vote failing last month.

The bill became mired in a debate over work requirements for food assistance and farm subsidy limits, among other issues.

'It's all coming down on us at once'

"There’s no shortage of things to think about when you lay awake at night," said Bardole, an Iowa Soybean Association board member.

"Iowa agriculture depends on trade — we're very good at growing crops and livestock," he said. "Without trade, it would devastate the economy."

Bardole said he understands the Trump administration's desire to get better trade deals with China, Mexico and Canada. But he struggles with the EPA's decision to grant waivers to refiners that must blend ethanol and biodiesel into the nation's fuel supply.

Ethanol advocates estimate the waivers cut 1.6 billion gallons in ethanol and biodiesel demand in 2016 and 2017.

About half of Iowa's corn crop annually goes to ethanol and distillers grains, a byproduct that's fed to livestock.

Trump has said he supports making gasoline with 15 percent ethanol available over the summer, which is now banned. But the EPA hasn't put those regulations in place.

Renewable fuels groups petitioned the EPA on Monday to re-evaluate its regulations around the so-called small-refinery waivers, which have included waivers to oil giants such as Marathon.

Bardole said uncertainty around planting, trade and ethanol is making some Iowa ag bankers nervous.

"There aren't many industries where the first goal is to break even," he said. "We can't have very many more years like the last few — it's already starting to weed people out.

"It's all coming down on us at once."

ISU's Hart agreed. Farmers and lenders worry that low prices and trade disputes, among other concerns, could spark another 1980s farm crisis.

"We're not there yet. But an industry can only take a beating for so long before it becomes a crisis," he said.

Planting nearly finished

Nearly all of Iowa's corn crop has been planted, with 91 percent of the crop shooting up from the soil.

Eighty-one percent of the corn crop was rated in good to excellent condition. Soybean growers have 93 percent of the crop planted, with 72 percent of the plants emerged.

The season's first soybean rating shows 80 percent in good to excellent condition.