Trade war puts Virginia farmers at risk of losing ‘critical market’ in China, By MICHAEL MARTZ Richmond Times- Dispatch Apr 5, 2018
China said this week that it will slap a 25 percent tariff on U.S. soybeans in retaliation for President Donald Trump’s launch of a tariff strike on imports of Chinese goods, raising alarm among state and national agricultural officials about the likely harm to farmers who remain the heart of Virginia’s economy, especially in international trade.“I would call China a critical market,” said Elaine Lidholm, spokeswoman for the Virginia Department of Agriculture and Consumer Services. “Because agriculture is by far Virginia’s largest private industry, it could affect the economy in general.”
The price of soybeans has dropped more than $1 a bushel since the start of June, said Nick Moody, president of the Virginia Soybean Association and a soybean farmer in Dinwiddie County. “These declines are directly related to the unrest in trade negotiations between the U.S. and China,” he added. Last year, soybeans accounted for $360.7 million – or nearly 62 percent – of the $584 million in agriculture-and-forestry products that Virginia exported to China. In 2017, Illinois ranked No. 1 in the nation for soybean production; Iowa was No. 2; and Virginia was No. 20, according to United States Department of Agriculture data.
The Severe Implications of Soybean Tariffs, By Sara Schafer Top Producer Editor, AG WEB APRIL 18, 2018 11:00 AM
At the Farm Gate If this tariff goes through, it would result in a significant deterioration in cash flow for U.S. farmers, according to recent analysis from the University of Illinois and Ohio State University. (See the farmdoc daily piece, Impacts of Chinese Soybean Tariffs on Financial Position of Central Illinois Grain Farms,” written by Krista Swanson, Gary Schnitkey, Todd Hubbs, Jonathan Coppess, Nick Paulson and Carl Zulauf). The economists looked at the potential impacts of a 25% soybean tariff on an average central Illinois grain farm (1,700 acres, of which 11% is owned, 44% is share rented and 45% is cash rented). At the end of 2017, the farm has $3,780,000 in net worth, a 26.8% debt-to-asset ratio, a 1.79 current ratio, and a debt coverage ratio of 150.6%. They simulated this farm’s performance from 2018 through 2021. Three alternatives were applied in the simulation:
“The imposition of a 25% soybean tariff by China on U.S. soybean exports would result in a worsened financial and wealth position for the case farm examined,” the economists report. “Cash rent declines would need to occur to offset some of the price declines. The 25% tariff would have larger negative impacts on farms with higher debt levels and higher amounts of cash rent. The reverse is true as well.”
- Lower Prices. Soybean and corn prices likely would decline as a result of the imposition of a 25% soybean tariff.
- Lower Prices Plus Lower Costs. As a result of price decrease, non-land costs and cash rents likely will decrease. In addition, acreage in central Illinois and the Midwest, would switch from soybeans to corn.
- Farmland Price Declines. Lower commodity prices likely will lead to lower farmland returns and lower cash rents. As a result, farmland prices would decline.