LANSING — With China and U.S. agreeing to a tariff ceasefire for 90 days, Michigan soybeans farmers can breathe a collective sigh of relief — for the moment.
Jim Hilker, agricultural economist with Michigan State University, told Michigan Farm News Monday that soybean prices are already up 15 cents since the China-U.S. truce was made at the G-20 Summit in Buenos Aires over the weekend.
This pricing increase affects farmers in the short-term, Hilker said.
“If we get this fixed or even marginally (fixed), then yes, even those minor fixes make it better for our producers,” Hilker said. “Some farmers need to move beans now; they need money. I would say in the short-term, it’s already marginally better for our soybean farmers.”
Previously, U.S. President Donald Trump planned to raise tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent starting Jan. 1. China doesn’t want this to happen, according to the New York Times, and are willing to “increase their purchases of American soybeans and natural gas.”
“If this gets solved around early March, I think it would definitely help next year’s prices, and we can also get a better idea if we should plant corn or soybeans,” Hilker said. “No matter who it is, if we started exporting more in the U.S., it helps Michigan. If there are more exports to China in the next 90 days, it helps the soybean price … (because) we are tied (directly) to the U.S. price as a whole.”
Despite some optimism from Hilker, Zeeland Farm Services Inc. President Cliff Meeuwsen said there are other market challenges at play for soybean farmers. Among those, he said, are a strong dollar — “which adds a headwind with pricing against other countries” — large world inventories of soybeans, and large crop plantings in South America.
“The tariffs are another headwind, but we are finding ways around those (tariffs),” Meeuwsen said. “We are selling soybeans to Argentina, so we are getting around those tariffs in some respect. The lifting of the tariffs will help us sell beans in the world (export) picture, but the other three things make it tough for us to sell beans anywhere in the world.”
According to National Ag Statistic Service figures, Michigan was expected to plant 2.3 million acres of soybeans in 2018, with a projected trend-line yield of 50.50 bushels per acre. Since the launch of the Chinese tariff battle on May 29, November soybean contracts on the Chicago Board of Trade dropped from a high of $10.60 to $8.70 when the contract closed in mid-November – reflecting nearly an 18 percent decline in market value. In hard-dollar terms that equates to market value losses in excess of $220 million in Michigan alone.
Ernie Birchmeier, manager of the Center for Commodity Farm and Industry Relations for the Michigan Farm Bureau, said market value losses for the big-three – corn, soybeans and wheat – since May are very quickly approaching $444 million for Michigan farmers.
“As we have said repeatedly, fixing these trade deals is critical to agriculture, not just for soybeans but for all impacted commodities,” Birchmeier said. “The world is our marketplace, and it is imperative that we have the opportunity to compete on a playing field that is free and fair.”
Birchmeier added that while the markets have reacted positively to the recent trade progress announcements, Congress and the Trump administration need to finish the job.
“Relief and positive news is definitely needed at the farm-gate level, (and) finalizing USMCA and China purchasing American agriculture products again would be a nice Christmas gift for our farmers,” he said.
As an industry, Meeuwsen said he’s optimistic a trade deal between China and the U.S. can come to fruition. Yet, he wonders how long that optimism will last.
“Just lifting the tariff won’t mean that soybeans will go up in price,” Meeuwsen added. “The price of soybeans have gone up 50 to 75 cents the last month because of anticipation that tariffs of being dropped. Certainly it will help if (the tariffs) are not there, but will prices stay up?
“I am not sure.”