Iowa farmers' angst grows as tariffs mount. But many still back Trump and his allies ... for now

Donnelle Eller | The Des Moines Register

Show Caption Hide Caption Governor candidates discuss tariffs on cross state trips Both candidates for Iowa Governor talked to farmers at stops across the state about their concerns over the mounting trade war with China.

GOLDFIELD, Ia. — In a grain elevator board room, Gov. Kim Reynolds tells a dozen farmers she's pushing the White House for an ag win, something that would help offset punishing Chinese tariffs that could cost Iowa growers about $1 billion.

“We need to see something, somewhere,” the Republican governor said at Gold-Eagle Cooperative, a 1,000-member elevator and ethanol plant in north central Iowa.

"Every week, the angst grows" as farmers move toward harvest, she said. Reynolds is facing her first election after six years as the lieutenant governor and a year as the state's CEO. "This is their livelihood, and they need some relief."

The clock is ticking as Republicans work to hold the support of farmers, a group that helped push President Donald Trump to victory in Iowa and the nation two years ago. With the midterm election just four months away, that support could determine whether Republicans keep control of statehouses, governor's offices and Congress.

So far, farmers and GOP leaders say ag country mostly supports the president's quest for better trade deals with China, Mexico, Canada and other major trade partners.

But they question how long that will last amid an avalanche of farm challenges: tariffs in their largest export markets, a record amount of soybeans in bins and elevators, and commodity prices that fail to cover the costs to grow their crops.

"People are patient to a point. But we're running out of time," said Iowa Ag Secretary Mike Naig, who, like Reynolds, is crisscrossing the state, telling farmers he understands their concerns and sacrifices.

Also like Reynolds, Naig faces his first standalone bid for office. His former boss, Bill Northey, took a top federal ag administration job in March.

Naig acknowledged that growing farm losses could cost GOP candidates in November.

"We need to see progress now," he said.

'We're looking at bold red ink'

U.S. soybean prices have dropped about 20 percent since March, when Trump first levied U.S. tariffs on steel and aluminium imports, prompting China and other countries to retaliate.

Prices for pork, corn and other major Iowa farm goods have tumbled as well.

"In the best of years, that would be the entire profit. ... And this is not the best of years" for profits, said Brad Davis, Gold-Eagle Cooperative's general manager.

Iowa farm income already has fallen 70 percent since 2013.

"We're looking at bold red ink right now," Davis said, adding that it's unclear whether prices will fall more the longer the tariffs continue — or if they'll rebound with new trade deals.

The unease over tariffs and the future of trade deals impacts the prices farmers will get for this fall and potentially for grain still on hand from last year's harvest.

Iowa farmers had 220 million bushels of soybeans stored last month, close to 40 percent of last year's crop. It's the state's fourth-largest carryover for June.

On top of that, farmers must begin making decisions for next year — paying rent on farmland and buying seed, fertilizer, herbicides and other products they'll need to grow a crop, Davis said.

"This could be a really bad deal," Davis said. "What if corn prices fall to $2 a bushel" and farmers pay for inputs for corn that's now trading around $3 a bushel?

"There are major risks," he said. "Many farmers are just frozen. They just don't know what to do."

"Farmers are beginning to lose confidence that things will come back to normal," Davis said.

'Step up, defend farmers'

At a farm near Newton, Democratic gubernatorial candidate Fred Hubbell said Reynolds has failed to fight hard enough for Iowa farmers.

"We need to step up and defend farmers and defend Iowans, not defend the president," said Hubbell, after looking at what could be a bumper soybean crop for Mark Tinnermeier, who owns the land and farms it with a neighbor.

"Our governor is elected to represent Iowans, and I think the governor should be doing a lot more to make it clear how harmful this is to our state," said the former insurance CEO. Hubbell said he would work with a coalition of state ag leaders to fight the president's tariffs and would lead trade missions to Canada and Mexico to rebuild markets.

The tariffs are "threatening the livelihoods of a lot of people and communities across our state," Hubbell said. "Farmers are paying too high a price."

A day later, Reynolds told farmers at the Gold-Eagle co-op she's pressing the Trump administration on trade.

The governor said she told Vice President Mike Pence during his recent trip to Cedar Rapids that "farmers are willing to give the president some latitude to get something done, but we need to see some movement."

► MORE: Mike Pence in Iowa: 'We're always going to stand with American farmers'

And Reynolds has pushed farmer concerns with the president, U.S. Ag Secretary Sonny Perdue, along with other cabinet members, and former Gov. Terry Branstad, now the U.S. ambassador to China, she said.

"Our farmers need to see something that gives them optimism and brings some stability to an unstable market," said Reynolds, who became the state's first female governor when Branstad left for China.

Reynolds said year-round use of gasoline with 15 percent ethanol would boost corn demand. Iowa is the nation's largest corn grower and ethanol and biodiesel producer.

E15 is now banned in the summer, based on concerns it contributes to smog, a claim ethanol advocates say is unfounded.

Even though the president says he supports year-round E15 use, the effort never gained traction with Scott Pruitt, the recently ousted administrator at the U.S. Environmental Protection Agency.

Perdue has said the federal government could use the Commodity Credit Corp., a standalone agency with $30 billion the administration could tap to help farmers harmed in U.S. trade disputes.

► MORE: Can U.S. agency that brought us government cheese protect farmers from tariff fallout?

The former Georgia governor, though, has declined to provide details until Labor Day.

Despite the promise of help, Mack Shelley, an Iowa State University political science professor, said he doubts the federal government will be "dumping billions from helicopters" across Iowa fields.

Reynolds said government aid "is not a long-term answer. That might fill the gap now, but that's not the solution by any means."

She brushed off Hubbell's criticism that she's not doing enough. Reynolds said she's fought what she and the farm community think are overzealous federal water regulations and negative action on renewable fuels, among other important ag issues.

"I don't care who the president is. ... I'm fighting for Iowa farmers," Reynolds said.

'The real damage will happen at harvest'

U.S. trade disputes are growing. Trump announced earlier this month America would look to add 10 percent tariffs on $200 billion more in Chinese goods.

China plans to retaliate, on top of the $50 billion of U.S. imports to which it's already adding 25 percent tariffs, catching Iowa's pork and soybeans.

China is the largest buyer of U.S. soybeans, at $14 billion last year, and second-largest purchaser of pork, at $1.5 billion.

"We know China is going to retaliate, but we don't know how," said Chad Hart, an ISU economist. "We don't have $200 billion in trade with them."

Last year, the United States sent about $130 billion in goods to China, which sold nearly $506 billion in products to the U.S., federal data show.

Trump accuses China of unfair trade practices, including stealing American intellectual property.

"They may have to double up on some tariffs — to increase the value that way," Hart said.

Or China could look at other financial actions, such as selling U.S. Treasury bonds, which support American debt.

"The real damage will happen at harvest, when grain losses are realized," Hart said, adding that pork producers already are getting hit with lower prices.

Losses to Iowa soybean growers could be around $624 million, with pork producers facing $360 million in losses, according to Hart and other ISU economists.

Many Iowa soybean growers likely locked in higher grain prices for at least part of their crop before the trade disputes began, Hart said.

"But producers that weren't as aggressive likely are feeling squeezed with the dramatic erosion in prices," Hart said. "And there's nothing on the horizon that will bring those prices up," given likely strong U.S. yields and reduced exports.

"Our problem is that we have trade disputes with China. With Mexico. With Canada. With the EU (European Union). Basically all our trading partners," he said.

Prices 'definitely could go lower'

Jon Dawley, who farms near Deep River in east central Iowa, says tariffs are dragging farmers back into a downturn they were beginning to escape.

"I thought we were working our way out of a very bad time. But the tariffs have put us back in a very tough situation," said Dawley, who raises corn, soybeans and cattle.

"It's pretty tough thinking about making a sale now," said Dawley, who hosted Hubbell as he toured the state.

"I would think farmers would take a real look at who they’re voting for this fall, if tariffs are affecting the commodity markets as negatively as they have been," he said.

However, Jeff Morris, who raises cattle, pigs, corn and soybeans near Titonka, in north central Iowa, said he supports the president's efforts to get the country better trade deals.

"It took 13 years to get our beef back into China," said Morris, a Gold-Eagle board member. "It was frustrating that nothing was being done all those years."

Still, Morris didn't imagine when he voted for Trump that, as president, he would turn to tariffs when negotiating new deals.

"I still have faith that he will get something done," he said. "But if this drags on — and I can’t say how long — at some point, I’ll say he can’t get this fixed.

"With corn in low $3s and soybeans below $8, we’re going to lose a lot of money. ... And it could definitely go lower," Morris said.

Why China's tariffs matter to Iowa Iowa is an agricultural powerhouse, exporting products all over the world. That’s why many are concerned about a possible trade war with China.

Approval rating dives

Trump's approval rating in Iowa, never higher than 50 percent, dropped to 43 percent in March, said Cameron Easley of Morning Consult, a digital research company.

Fifty-three percent of Iowans disapproved of the president's job that month.

Trump's overall rating in Iowa dropped 9 percentage points from February to March, the biggest negative swing in the country. "March was a newsy month, with a lot of the Stormy Daniels controversy reaching a crescendo," Easley said.

Daniels is the adult film actress catapulted to mainstream fame after revealing she was paid $130,000 to stay quiet about an alleged sexual affair with Trump before he became president.

"But I think the trade tariffs definitely came into play as well," he said. "It's fair to say there's been negative movement since February."

In a national Pew Research Center poll released Thursday, 49 percent of adults said increased U.S.-trading partner tariffs would be bad for the country. Forty percent said the tariffs would be good, while 11 percent were unsure.

Despite the gloomy financial outlook for ag, Shelley, the ISU political science professor, said it would likely take more than tariffs to get Iowa farmers to break from Trump.

"I don't think one specific thing could make that happen. But an accumulation of things could," Shelley said. "If the national and state economies were to really hit the brakes because of the tariffs, yeah, then I think" farmers could withdraw their support.

Fall, winter could be 'very difficult'

Leslie Miller, an ag lender at Iowa State Savings Bank in Knoxville, said farmers in the state are eating through their financial cushion as they go through another year of losses, especially for growers who rent a lot of ground.

"The losses are growing," Miller said. "Not everyone forward-sold as much crop as they needed to. And not everybody has the highest level of crop insurance.

"There were a lot of people waiting for a weather rally" this summer, she said. "If they have to dump their crop this fall, they're looking at really low prices.

"It could be a very difficult fall and very difficult winter for a lot of farmers," Miller said.

John Fredrickson, who farms near Farnhamville, remembers the neighbors and banks that went under during Iowa's 1980s farm crisis, one of the worst recessions in the state's history.

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

"It's not easy ... to go out and say, 'Can you line up your machinery because the auctioneer is going to be out to get ready for the sale?'" said Fredrickson, a young ag lender at the time.

"That's as hard a blow" as anyone can take, he said.

Fredrickson told Iowa ag secretary Naig that he hopes the state doesn't see a return of those difficult times.

"I hope there's a solution before very long. I don't think there's a lot of people who can handle more stress than they are right now," he said.

Fredrickson voted for Trump and holds out hope that the president can land some good deals. "The end hasn't been written yet."