Central Illinois Farmers Start New Year With Trade Uncertainty | WGLT

Central Illinois Farmers Start New Year With Trade Uncertainty

Jan 10, 2019

All around Doug Schroeder's farm in Bellflower in southeastern McLean County, there are remnants of a more profitable time.

There’s a 10,000-square-foot shed with heated floors they put up in 2011 when they were making money, $2 million in machinery, and a new, faster system for moving grain between trucks and storage.

Things will be different this year. Schroeder won't be replacing any of that machinery. The ongoing trade dispute with China has hit soybean farmers like Schroeder hard. Prices dropped as China almost entirely stopped buying soybeans last year.

Schroeder said it's a double-whammy, because trade issues have also driven up the price of steel—the material used to make things like tractors.

“And so not only are we getting less for the product we’re selling, but we have to pay more for the inputs we need to buy to produce corn and soybeans. So we get kicked twice in this whole thing. If you’re not making money, it’s hard to spend the money,” Schroeder said.

"The world's becoming a more interwoven place all the time. There's gotta be a win-win situation here somehow."

China used to be the biggest buyer of U.S.-grown soybeans. About a quarter of all Illinois beans went to China. But in retaliation for similar U.S. tariffs on Chinese imports, China imposed a 25 percent tariff on imports of U.S. soybeans, resulting in a dramatic drop in shipments.

“The day the Chinese announced that tariff, the price of our soybeans dropped about 20 percent,” Schroeder said.

The average price for a bushel of soybeans has been around $11 for the last decade or so.

Supply and demand is the key here. China cut into demand. And then last fall at harvest time, American farmers produce a record 4.6 billion bushels of beans. Supply up, demand down.

“During harvest, we had the opportunity to sell beans here for less than $8 a bushel. There was a $7 in front of the price. That’s historically a very, very low number,” he said.

That's changed the normal post-harvest routine for many farmers. Some waited to sell their beans, hoping for prices to tick up a bit. Grain elevators filled up; some expanded their storage capacity.

“The negative effect of these tariffs on our soybean producers has really become a reality as we step into the new year,” said Mike Levin, director of public policy and regulatory affairs for the Illinois Soybean Association, based in Bloomington. “We’re now worried about the future. And many of my farmers are worried about their businesses and if they’re going to continue on.”

Schroeder, of Mahomet, is a relatively large farmer, working over 4,000 acres in McLean, Piatt, and Champaign counties, with his son and son-in-law. Tough trade disputes are actually the reason he grows corn and beans in the first place.

Schroeder's father was a cattle farmer until the mid-1970s, when growing Russian imports drove up the price of grain and farmland. Chasing the business, his father switched to corn and beans. Then Russia invaded Afghanistan, the Carter administration enacted its grain embargo against Russia.

“The price of grain then crashed, and the price of land then followed, and the next thing you know Willie Nelson came to the University of Illinois and they had Farm Aid,” Schroeder said. “That was a really, really hard time, and that’s when I was cutting my teeth out here.”

Schroeder said he and many other farmers agree that the U.S.-China trade relationship needs to be re-balanced, but not like what the Trump administration has done.

A farmer offloads soybeans from his combine as he harvests his crops in Brownsburg, Ind., in September.
Credit Michael Conroy / AP

“Using food as a way to strike back at a country has never worked over time. The consumers in both countries end up paying the price,” he said.

To soften the blow for farmers, the Trump administration has earmarked $9.5 billion in direct payments to growers of soybeans, corn, wheat, and other commodities most affected by tariffs.

The first round of payments went out in September. Schroeder's farm applied for payments at the end of 2018, expecting the money sometime in 2019.

“It will help, but it won’t make us whole,” Schroeder said. “It’s funny how stuff works out. The government is shut down. Will our payments come or not? We’ve been led to believe they will come, but they haven’t hit the mailbox yet. What we really want is not aid. What we really want is just fair trade.”

The deadline to sign up for the second round of payments had been Jan. 15. But that’s been extended indefinitely because, with the shutdown, farmers haven't been able to apply with the USDA.

GLT was unable to find out how much has already been distributed to central Illinois farmers because of the shutdown. The USDA press office is closed.

“We of course welcome these payments, but it’s a short-term fix. A very short-term fix,” said Levin.

Attention now turns to the 2019 planting season. Farmers like Schroeder say they're not going to be making big capital purchases.

That trickles down across the economy. Noted agriculture columnist Alan Guebert from Delavan said expect even more consolidation in farm equipment dealers.

“Competition is going to be incredibly tough in the coming year for machinery dealers, seed dealers, fertilizer dealers—you name it,” Guebert said.

The Trump administration reached a 90-day trade truce with China last month, buying time for trade talks that continued this week in Beijing. That included a Chinese pledge to buy 1 to 2 million metric tons of soybeans. But Guebert said that truce doesn't mean a whole lot yet.

“One million metric tons is truly a drop in the export ocean. It’s not very much. While every bit is good—I’d rather have one scoop of ice cream than not have any—30 (metric tons of soybeans) sounds a whole lot better. Especially if that’s where you were a year ago,” Guebert said.

For Guebert, this whole trade dispute with China reveals a bigger issue with American farm policy, which is supported by trade groups like the Farm Bureau and Soybean Association.

Guebert said U.S. farm policy is focused on commodity production, exports, profits, efficiency—not food, or rural development. That farm policy, he said, paired with the Trump administration’s tariff approach on trade make for a losing combination.

“You can do whatever you want, but if you’re doing the wrong thing relative to the farm policy we have—and we are right now—then you have a circular firing squad. You really don’t have a policy that’s gonna work, now or in the future,” he said.

Guebert said one thing that's missing from U.S. farm policy, including the new farm bill, is an emphasis on rural America, which has been hallowed out in recent decades.

That, he said, happens as ag giants like Monsanto and Deere continue to make money, even during this trade dispute. That's because the U.S. government is sending farmers money, he said.

“If you’re going to give these guys cocaine, they’re gonna get addicted,” Guebert said.

Schroeder, the farmer, is also on the Illinois Soybean Association's board of directors. He’s headed to China on Saturday for a trade trip.

“These are very, very smart people in China. And in Washington. Let’s get together. Let’s get this thing worked out. The world’s becoming a more interwoven place all the time. There’s gotta be a win-win situation here somehow. We’re hopeful that both these governments will get together, sit down, and move together in a positive direction.”

During this week's trade talks in Beijing, American trade officials say the two sides discussed China’s pledge to buy a “substantial” amount of American agricultural, energy and manufacturing products. But no deal was reached.

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