MENU

Reason.com

Free Minds & Free Markets

Trump's Bailout Won't Save Soybean Farmers

Soybean prices have fallen as much as 30 percent since planting season, and harvest is fast approaching.

Aleksandra Michalska/REUTERS/NewscomAleksandra Michalska/REUTERS/NewscomAt Highland Family Farms in southern Minnesota, Kristin Duncanson and her husband Pat were overseeing the planting of about 3,000 acres of corn, soy beans, and grains when the trade war began.

Since then, the value of those soy beans—which will be ready to harvest within the next few weeks—has plummeted by about 30 percent. Like many farmers across the country, Duncanson is preparing to take a major hit from the tariffs imposed by China this summer, a response to President Donald Trump's decision to slap higher import taxes on $250 billion of Chinese-made goods (along with other tariffs on steel and aluminum imported from a variety of sources).

"We've developed customers in China and we'd like to continue to do business with them," Duncanson told Reason on Tuesday. "Half our crop is soy beans, and that's an important part of how southern Minnesota works. Soy beans are a major crop for us. To have that tariff and have that devaluation is tough."

Farmers have been hit particularly hard by the early stages of the trade war because of how quickly prices can swing in commodities markets. While tariffs have also caused increases in the price of steel, which is passed along the supply chain by steel-consuming industries and eventually to consumers, farmers took a devastating hit from China's tariffs almost immediately. To make matters even worse, surging demand from China led American farms to plant more acres of soybeans than corn this year for the first time ever.

China is the world's largest consumer of soybeans, but tariffs are only part of an overall Chinese strategy to slash consumption of soybeans grown in the United States, which happens to be the world's largest grower of the popular foodstuff. According to Reuters, Chinese officials have outlined a six-part plan to reduce dependence on American soybeans, by taking steps to substitute alternative protein sources like rapeseed or cotton seed for feeding pigs, tapping into a government-run strategic soybean reserve, and boosting imports from Brazil and Argentina.

Meanwhile, the Department of Agriculture says U.S. soybean production in 2018-19 will hit 4.6 billion bushels, an all-time high. Reduced access to Chinese markets will increase the domestic surplus and further depress prices, The Wall Street Journal reported this week.

The surpluses could be sold to Europe—the E.U. announced this week that America is now the leading supplier of soybeans into Europe. Or to Argentina, which is now importing cheaper American soybeans for domestic consumption while selling their own soybeans to China, an arrangement Bloomberg describes as a trade merry-go-round.

Indeed, the Trump administration claimed to have achieved a major victory this summer by inking a "deal" with Europe that would prevent the E.U. from raising tariffs against soybeans—essentially guaranteeing that European markets could be an escape valve for a soybean surplus.

But that's not as much help as the administration might think.

"It really bothers me when they say, 'Well, you're going to sell more commodities than you've ever, ever sold before,'" Zippy Duvall, a Georgia farmer and president of the American Farm Bureau said this week. "Well, yes, if I sell them at a reduced price, I'm no better off. Yes, we'd like to clear them out of inventories, but we still have got to make cost of production to make a living."

In the face of those economic losses, the Trump administration has put forth a plan to subsidize farmers with $12 billion by resurrecting a New Deal-era crop insurance program. Some of those payments have already been made, but there's already indications that it won't be enough to cover all farmers—to say nothing of all the other industries negatively affected by the tariffs, some of which are also making noise about bailouts.

From the perspective of southern Minnesota, Duncanson says the bailouts won't save farms in the long run.

"Granted, that will help pay some bills for some families and get them through for a while, but that's not where we want to be," she says. "We want to participate in the economy just like everyone else, and we want to benefit from trade."

Photo Credit: Aleksandra Michalska/REUTERS/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Don't look at me!||

    They'll be back.

  • Kongming||

    Hamilton reference?

  • buybuydandavis||

    Terminator

  • sarcasmic||

    Fake news. Trump never intended to hurt farmers, so this isn't really happening. It's just lies cooked up by Hillary voters.

  • BestUsedCarSales||

    We'll just make a bigger farm bill next year to save them harder.

  • NotAnotherSkippy||

    But tarrifs only hurt consumers. All the smartest ppl told me so.

  • sarcasmic||

    Those smartest people were pointing out that tariffs must first hurt consumers before they can hurt foreign producers. Foreign producers are hurt when domestic consumers buy less of their stuff, and domestic consumers buy less of their stuff because tariffs make that stuff more expensive. This hurts consumers because now they get less stuff for their money. The fact that consumers must be hurt before tariffs can have their desired effect of hurting foreign producers is ignored, denied, or dismissed by protectionists. That is what the smartest people say anyway.

    But they only say that because they hate Trump. Because they hate Trump all of their arguments are nonsense because they hate Trump. Did I mention that they are wrong because they hate Trump? They hate Trump.

  • christwasnotarepublican2||

    You are basically advocating a centrally planned economy and calling that conservative. The natsec tarriffs are a way of picking winners and losers. It definitely should not be defended by saying that hurting farmers was not it's intent. It's intent is to choose which industries in the US are favored over others, and is a tax on consumers. Both businesses buying intermediate goods and those buying retail goods. It is a clunky version if socialism that doesn't even give the people free healthcare. If you think you are in anyway espousing a libertarian viewpoint, I've got some Gant steel to sell you

  • Fist of Etiquette||

    At Highland Family Farms in southern Minnesota, Kristin Duncanson...

    I loved her in Interview with the Vampire

    If a bailout doesn't work, you simply subsidize harder. And it's not Trump's fault that the soybean industry was gaming the unfair trade system. It was only a matter of time until it caught up to them.

  • Dillinger||

    Drop Dead Gorgeous is damn funny every time.

  • christwasnotarepublican2||

    But he is going to build the wall and prevent those people from shite-hole countries from coming here. Let's just forget that it's actually the skilled immigrants who put downward pressure on wages for jobs people actually want. Merit based immigration is worse than the existing immigration regime which normally imports more unskilled labor that both increases aggregate demand and pushes all but theost blockheaded of native US workers who are resistant to change up the economic ladder. Those same workers who would be displaced by automation in factories anyhow. With automation being by far the most significant cause of semi-skilled manufacturer jobs disappearing. And let's put up a bunch of tarriffs on goods too so that we pay a tax o ln goods we don't even produce in the US anymore, like TVs. That will really show'm.

  • ThomasD||

    "... the soybean industry was gaming the unfair trade system."

    Yep.

    These Reason articles wouldn't be so tedious if they would at least admit that markets are dynamic and that these are not static relationships.

  • DesigNate||

    Don't sell yourself short lil buddy. You'll always be our resident idiot.

  • DesigNate||

    You've been handed your ass so many times on this board, I've lost count.

    I will say this though: You are consistent and definitely a secularist (not that I think there's anything wrong with religion or faith). And you take the jabs pretty well, so I appreciate your being here and keeping us from being an echo chamber.

  • loveconstitution1789||

    Buttplugger, you just got your ass handed to you.

  • Dillinger||

    can be stupid *and* part of T's master plan.

  • ||

    "We've developed customers in China and we'd like to continue to do business with them," Duncanson told Reason on Tuesday.

    And the Reason interviewer followed up with, "Oh, do you speak Mandarin or Cantonese?", "Where'd you fly into China when developing these customers?", and "Did you work directly with beef producers and restaurant owners in a farm-to-plate fashion or did you just deal with distributors and regional officials?" Right?

  • Unicorn Abattoir||

    You know, it is possible that some of these customers have English-speaking execs/employees.

  • ||

    You know, it is possible that some of these customers have English-speaking execs/employees.

    It's entirely possible that there's a whole futures and contract market, several even, set up so that producers don't have to meet consumers face to face at planting and harvest in order develop partnerships to get the grain sold. But the whole discussion about Chinese Government owned processors, the Merc, and Designated Self-Regulatory Organizations is really complicated and it's just so much easier to go with the near completely fabricated sob story of "We used to peddled our grain cart all around China looking for buyers until Trump raised tariffs."

  • Bubba Jones||

    Is this an example of the trade war lowering prices for american consumers?

  • VinniUSMC||

    Aww, look at the cute little strawman. You didn't strain yourself too hard coming up with that, did you?

  • Homple||

    For what it's worth, here's a 5 year nasdaq graph showing a serious downward trend of soybean prices. This drop looks consistent with past behavior.

    https://tinyurl.com/y7syalbt

    Maybe its time to plant something other than soybeans.

    I wonder if a writer for an outfit advocating free markets (you know, demand/supply/price) bothered to check harvest forecasts to see if extra supply might be causing part of the price drop. My guess, he just copy/pasted a press release from the Farm Bureau or something.

  • mswen||

    Here's a video of some idiots throwing water on a grease fire. It's easy for well-meaning people to turn a minor issue into a giant fireball.
    https://www.youtube.com/watch?v=0v42UcYI2q0

    And since most US crop prices peaked in 2013, you're really cherry-picking your data.

  • christwasnotarepublican2||

    So, let's pick winners and losers like a proper communist economy the instead. That's what tarriffs are doing, at least our own. Retalitory tarriffs are just that. Retalitory. Also, I don't see any information on productivity increases in your sources.

  • buybuydandavis||

    GDP Growth 4%+

    And all Boehm does is cherry pick those on the short end of the tick.

    Sad.

    Changing laws has winners and losers. Looks like a whole lot more winners these days than losers.

    " tariffs imposed by China this summer, a response to President Donald Trump's decision to slap higher import taxes on $250 billion of Chinese-made goods"

    You see, when China imposes tariffs, it's because of mean old Trump, who imposed tariffs entirely out of the blue, the first tariffs that have ever existed in the world ever!

    Thanks, Boehm.

    You're always good for a satisfying 2 Minutes Hate. That's the only reason to come to Reason anymore.

  • christwasnotarepublican2||

    Considering we set up the WTO to our benefit, but raise tarriffs above their limits, we are picking winners and losers. We are also screwing ourselves. Please tell me the natsec reason you have for imagined up for the tarriffs on every Chinese good and why you think services are not part of the trade balance. We want things we don't make here. There is no justification for raising the prices of those things. Nobody is forced to buy goods from China. That's the free part of free markets, and freedom. The Trump GOP supports a socialist economy with none of the benefits and all of the costs.

  • Ride 'Em||

    I've come to think that trade wars are the evolution of war. War started out as small bands raiding villages. Then it grew to something much bigger were massive destruction of populations became a strategy. Ghengis Khan is an example of this. Defeating both the military and the population was a key part of war through Sherman's War is Hell and WWII as evidenced by the fire bombing of Dresden . Then the West got enlightened and decided that civilian dying was wrong. So, we have developed weapons that target specific groups and reduce the affect on the general population. This is why it is hard to defeat terrorism as the supporters in the population never have cause to not support the terrorist.

  • Ride 'Em||

    So, that brings us to trade wars. Major countries like the US and China don't want to start a war that would result in mass casualties. Way too much blood. But in order to win and prevent the behavior that one country doesn't like the new vehicle is trade wars where the population has to suffer and finally make enough noise that politicians have to react and surrender.

    I have been surprised that Trump has only alluded to patriotism to suppor his tariffs. I expect it will become more of the American way and that people will be asked to due their patriotic duty.

    Now there will always be justification for a military but I think it will be only used offensively on countries that in reality can't strike back. North Korea didn't become a major effort to come to some sort of deal until North Korea started to develop ballistic missiles that could hit the US. The prior attempts were more half hearted and weren't treated as necessary. Now all bets are off the table if one country develops a weapon or weapons that is so far superior to any other country that it can not be defearted.

  • gphx||

    The author is ignoring the real problem - the reason no one wants to buy US soybeans is because our farmers are effectively forced by Monsanto to grow GMO.

  • gphx||

    Prior to the institution of the income tax tariffs were the primary source of income for the Treasury. Trump instituted tariffs while lowering income taxes. In their hatred of Trump many supposed libertarians have inadvertently embraced the theft that is taxation.

  • moschinoonline||

    I know that you don't know this because you live in your Reason "I Hate Trump No Matter What" echo chamber, but believe it or not, many conservatives have been quite outspoken against the tariffs. Conservatives are free trade folks. They like free trade. They don't like tariffs.

    It's also possible to disagree with someone on a few policy points but agree with that person on everything else, leading to an overall support for that person.

    Moschino Logo Bikini White
    moschino purse

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online