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Farmer financial pain continues from trade fallout

More aid may be warranted, and Secretary Perdue said he’s been instructed to look into exactly that.

Indiana farmer Brent Bible lost $50,000 this week since the weekend tweet by President Trump of raising tariffs on $200 billion of Chinese goods from 10 to 25%.

Bible farms 5,000 acres of corn and soybeans in west central Indiana new Lafayette. Usually the margin on his grain sales is less than 10%. But with the 10% reduction in corn prices and 20-25% reduction of soybean prices from a year ago, that 10% margin has been wiped out and then some. He’s operating at a loss now.

A record crop of both corn and soybeans in 2018 has Bible left holding 20-25% of his 2018 corn crop, and 5% of soybeans. Yet going into 2019, he’s forward priced only about 20% of his soybeans and roughly the same amount for his corn.

“In the last three days of trading, we’ve seen that price reduction equate to about $50,000 in loss for us simply because of news and anticipation on what this Is going to bring in terms of a trade hardship,” Bible said.

Hindsight is always easier, as Bible said he should have mitigated risk a little bit better. However, based on the information he was getting from the administration he felt fairly confident that a deal was going to be reached with China by now. With reports that China would buy “tremendous” amounts of corn and soybeans being leveraged to help bring some equilibrium to the trade imbalance, he was hopeful. “When you’re getting that kind of information, you have confidence, whether right or wrong, that things are soon to be better. We’re not seeing that come to fruition unfortunately,” Bible said.

The Market Facilitation Program payments offered last fall to producers offered a lifeline for Bible, and many other producers. “We were anticipating probably looking at a breakeven year. When that payment was announced it made it more certain that we would at least show a profit for the year,” Bible said. “2018 was not a bad year once we factored in that MFP payment; it turned out to be a satisfactory year.”

However, he’s heard from other farmers they weren’t as lucky in 2018, where working capital took a significant hit. “Many have been in a pattern of erosion of working capital for the last three to four years. That’s just not sustainable,” he said.

Bible said he’s operating at a loss today, and projecting to be operating at a loss thru this year.

“We will burn through cash equity in the business at a fairly rapid rate if [tariffs] would continue. Our specific operation probably would survive two to three years operating at this level of loss,” he said.

President Trump has instructed Secretary of Agriculture Sonny Perdue to work on a plan quickly to deliver help to U.S. farmers in the wake of the higher tariffs imposed on China. Perdue’s tweet comes on the heels of comments Vice President Mike Pence made in Minnesota on Thursday saying the Administration was prepared to offer additional help to the farmers.  

While speaking at a Farm Foundation trade forum in Washington, D.C., on April 30, Dan Kowalski, economist and vice president of CoBank's Knowledge Exchange Division, said although farmers represent only 1-2% of the total U.S. population, the latest report reveals that their hurt has hit the mainstream.

Although farmers continue to say they want “trade, not aid,” Kowalski said until the many trade issues are resolved, they still need aid, too.

“Many farmers are thankful for a bridge, if necessary, and it is necessary right now,” Kowalski said of the trade aid. He noted that the payments in the fourth quarter helped many farmers get through 2018. “The severity of pain was masked down right now because of the payments,” he said.

Joanna Lidback, a small dairy farmer from Vermont, noted that the trade aid offered under MFP in dairy amounted to less than one month’s electricity bill, or 6 cents/cwt. “We will take any help we can get, but what we want is a fair price through trade,” Lidback said.

Kowalski added that policy-makers need to remember that these payments are not sustainable going forward.

TAGS: Trade
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