New Chinese tariffs’ impact on local farming still uncertain

Alfalfa winter kill creates more immediate problem
By: 

David Wilhelms Leader Correspondent

The impact of new tariffs on northeastern Wisconsin farmers is still unknown.

U.S. stock markets fell sharply Monday in a first response to the doubling of U.S. tariffs on Chinese goods over the weekend.

“Due to the economic struggle throughout the agriculture industry, it is really difficult to point to one issue such as tariffs causing farmers to put off projects or change plans,” Kimberly Kassube, Shawano County University of Wisconsin-Extension agriculture educator, said on Monday.

“The cause of low prices and rising costs of inputs is multifaceted and has been a problem for several years now, even before the tariffs that came into effect in 2018. The tariffs, however, added to the economic issues farmers are facing. It is hard to say what exactly will happen with the new tariffs taking place on June 1 but it certainly won’t help the current situation. As the new tariffs take effect, I would tell farmers as they face problems, reach out, Extension is here to help.”

Kassube is fielding very few inquiries about the dairy situation and surviving the tariffs,

“Most of the questions I am getting in right now center around the price of hay,” Kassube said. There was significant winter kill of alfalfa in the county this year, making already low forage inventories even lower. Many producers are looking for quality forage to buy as well as some alternative forages to grow this season to make up the low inventories.”

The American Soybean Association (ASA) weighed in on Monday with this statement: “While we support the Administration’s overall goals in these negotiations, ASA cannot support continuing and escalating the use of tariffs to achieve them. We call on the Administration to conclude an agreement focused on significantly reducing the U.S. trade deficit with China, including restoring and increasing our agricultural exports and eliminating China’s 25 percent tariff on U.S. soybeans.”

Robert Cropp, University of Wisconsin Cooperative Extension, reported in his April 2019 Dairy Situation & Outlook, “In summary, milk prices are shaping up to be much improved over the low milk prices in 2018.” The May Class I (fluid milk) price is $16.42, up 66 cents from last month and up $1.98 from a year ago.

Cropp expects steady increases in cheese prices while fluid (beverage) milk sales will continue to decline but said exports will be a significant factor.

President Donald Trump increased tariffs from 10% to 25% on $200 billion worth of Chinese imports as of June 1. The Chinese Finance Ministry on Monday announced tariff hikes of 5% to 25%. They apply to $60 billion of U.S. goods covering 5,140 products such as batteries, spinach and coffee as of June 1. China responded to continuing U.S. allegations of technology theft and pressure on companies to turn over trade secrets.

The president tweeted Friday morning that U.S. farmers would benefit from the U.S. possibly buying $15 billion in goods to provide foreign humanitarian assistance. Agriculture Secretary Sonny Perdue also tweeted Friday that the president directed the agency to “work on a plan quickly.” U.S. farm income this year is projected to be $69.4 billion, about 45% below a 2013 high.

The federal government already provides up to $10 billion in direct assistance to soybean, corn, pork, dairy and other producers to offset impacts from trade disputes with China, Mexico, Canada and other countries. It also spends about $1.2 billion to purchase food for schools, food pantries and other programs.

China is the fourth-largest export market for U.S. agriculture, buying $9.3 billion in U.S. agricultural products last year. Complicating the situation is a pandemic of African swine fever sweeping through China’s herd and cutting demand for whey and whey by-products along with soybeans.

The U.S. Dairy Export Council (USDEC) reports, “Chinese imports of dairy goods is up 13% in the first quarter compared to the same period in 2018. But they’ve been buying from everywhere but the U.S,” noting U.S. companies sold record volumes of cheese to South Korea, Japan, Southeast Asia, the Middle East/North Africa and Central America in March.

“Since the tariffs when into effect in July 2018, U.S. dairy volume to China has fallen 43%, factoring in March’s dismal results,” the USDEC report states.

The Associated Press’ Damian J. Trouse reported, “U.S. stocks extended the market’s slide into a second week as investors seek shelter from an escalating trade war between the U.S. and China. The world’s two largest economies had seemed on track to resolve the ongoing trade dispute that was cutting into consumers’ wallets and corporate balance sheets.”

A sticking point is U.S. insistence on an enforcement mechanism to ensure Beijing lives up to its commitments. American officials say China has repeatedly broken past promises.

FYI

What exactly are tariffs?

Tariffs are a tax on imports. They are typically charged as a percentage of the transaction price that a buyer pays a foreign seller. They are not payments from one government to another, according to CNBC.com. They are sometimes called duties or levies. U.S. Customs and Border Protection agents collect tariffs at 328 ports of entry across the country. The funds they collect go to the U.S. Treasury.

The Associated Press contributed to this story.