The United States Department of Agriculture projects record yields for Indiana farmers this year. But demand has fallen, in part because of Chinese tariffs on U.S. corn and soybeans, so farms’ cash flow could be limited.
Soybean prices have fallen from about $10 a bushel earlier this year to around $8 today. Purdue University agricultural economist Chris Hurt says on top of the tariffs, excess product will hurt prices this year, and impact 2019 production.
“When we have very large production, we tend to have extremely low prices,” says Hurt. “Farm incomes have been depressed for the last three years and that’s going to continue to be the case now it looks like for the next year.”
The soybean trade between the U.S. and China has taken more than 30 years to develop, but President Donald Trump’s economic fight with China could put that in jeopardy. Farmers were placed in the crosshairs of the trade war with China when the Chinese slapped a 25 percent tariff that took effect July 6 on several U.S. agricultural products, including corn and soybeans.
Indiana Farm Bureau President Randy Kron says he fears the trade war could have negative long-term effects for U.S. farmers.
“What I don’t want us to be is the market of kinda last resort; they only come here when they can’t get it anywhere else,’ he says. “I want to be the first on their list; not the last.”
This time of the year would typically be a peak time for farmers selling their harvest, if they did not pre-sell earlier in the year.
However, Hurt says China is now buying from Brazil and other countries, so West Coast ports are turning away soybeans, which makes other markets more competitive for sellers.
“The exporters in the Pacific Northwest are simply saying, ‘We don’t want the soybeans.’ Even if they had purchased the soybeans to be delivered at harvest time,” says Hurt. “The alternative is they’re trying to by railroad move those beans from the Dakotas to St. Louis or New Orleans to get them to the Mississippi River.”
He says an abundance of beans no longer being shipped to China are now heading towards the Atlantic Ocean to ship to Europe.
“We normally – in Indiana, Illinois and Iowa – would be supplying the beans down the Mississippi River,” says Hurt. “Now we’ve got a glut of beans coming from the northwestern part of the Corn Belt.”
Indiana Farm Bureau's Kron owns a farm in southern Indiana and says the downturn leaves many farmers concerned for their future.
“We’re trying to figure out on our farm how we pinch every penny. I mean we’re down to the pennies matter in trying to figure out how to survive,” says Kron.
The Trump administration has announced limited financial aid will be available to farmers, but economists warn it will only serve as a temporary bandage to a potentially long-term wound.