As Farm Bill discussions continue in Washington, D.C., producers wait for the direction a new bill will bring to the agricultural sector. Without a completed Farm Bill, producers are operating on the previous bill’s prices and provisions. The trade tariffs imposed on many U.S. agricultural products have raised concerns about the future of production agriculture.
Max Runge, an Alabama Cooperative Extension System agricultural economics specialist, said there is never an opportune time for trade disputes, but the timing is especially bad, as farm income is nearly half of what it was five years ago.
In early July, the U.S. imposed a 25 percent tariff on $34 billion worth of Chinese goods imported into the country. In retaliation, China made good on a previous threat to implement tariffs on U.S. items, including soybeans and other agricultural products. Soybeans are one of Alabama’s most commonly grown row crops, therefore, these tariffs have potential to hurt Alabama producers.
The National Agricultural Statistics Service (NASS) June crop acreage report indicates a one percent drop in soybean acreage planted in the U.S. The 2018 estimates show 89.1 million planted acres; down from 89.9 million acres the previous year. Compared to 2017, planted acreage is lower or the same in 14 of the 31 states that participated in the estimate. The U.S. currently crushes nearly half of the soybeans produced and exports the other half.
This is only the second time soybean planting has exceeded corn acreage in the U.S. Alabama soybean acreage was up three percent over 2017, and is second in row crop acres behind cotton.
“With the increased duties imposed by China, they will likely continue to buy U.S. soybeans but they will buy less of them,” Runge said. “Brazil and other soybean producing countries will be the beneficiary of an increased cost of U.S.-grown soybeans. Brazil and other countries could purchase some U.S. soybeans at discounted prices.”
Soybean Prices and Market
Runge said the large supply of soybeans and the trade tariffs have lowered soybean prices.
“The threat of a trade war mixed with the record production of soybeans and the prediction for another large soybean crop, has pulled the soybean price down,” Runge said. “If there are producers who haven’t priced 2018 soybeans, my advice is to wait and see. Hopefully, trade negations with China, Canada and Mexico will be settled sooner rather than later.”
Runge said July 7 was an interesting day for the soybean market. After implementation of the 25 percent tariff, the market closed on November soybeans with their largest price increase of 2018. Soybeans closed with a $.3875 increase. Even with the increase, November soybeans fell nearly $2 per bushel between the last week of May and the first week in July.
Secretary of Agriculture, Sonny Perdue, announced a $12 billion agricultural trade package geared toward providing relief for farmers. Farmers can expect more details next month.
Increased stress levels from trade issues, as well as the usual occupational risks, are taking a toll on farmers. With continued pressure on farm income, Farm Bill finalization is important to help producers as they plan for the future.