Tariffs and Trade Talk

Patrick Kirchhofer - Peoria County Farm Bureau

Tariffs and trade with China—what does it mean to U.S. farmers and our economy? If China does initiate an increase in tariffs on U.S. agriculture products, soybeans stand to lose the most.

In 2017, U.S. farmers harvested a record 4.39 billion bushels of soybeans. Of this, it's forecasted that we will export 2.065 billion bushels. That's nearly 50 percent of our soybeans being exported to other countries. This is definitely a significant factor when it comes to increasing the price that farmers receive for soybeans. How important is China to our soybean exports? Nearly two thirds of our exports go to China—a significant increase over the last two decades as their economy has boomed and a growing middle class can afford to add meat to their diet.

That brings us to the second phase of this trade and tariff talk. Animals eat soybeans—and lots of them. Soybeans are ground up into soy meal, which is a great source of protein for animals and poultry. In early April, we heard that China was going to impose a 25% tariff on pork imported from the U.S. How significant is it if U.S. pig farmers were to lose the export market to China? It's significant, but not nearly as much as soybeans.

In 1995, the U.S. became a net exporter of pork—for the first time, we shipped out more pigs than we shipped in from other countries. Our pork exports have grown tremendously in the last 20 years. We are now exporting six times more pork today compared to 1995.

Of the total U.S. pork production, we export approximately 25 percent, and China accounts for nine percent of our pork exports. According to my calculations, for every 40 pigs a U.S. farmer raises, one pig is shipped to China. It may not initially look too significant, but losing even a small share could have a trickle-down economic effect on farmers and our economy. Mexico is our largest purchaser of pork, buying 31 percent of exports; Japan is second at 23 percent.

What may be the most eye-opening factor is the potential loss of increased sales to China. China is the most populated country in the world, with an estimated 1.4 billion people—approximately 18 percent of the world's population. India is close behind with 1.3 billion. The U.S. is at 327 million. You can see that the U.S. stands to lose a lot if we curb our pork export growth to China.

So, you can see the correlation between soybeans and pigs. Would the U.S. be better off if we shipped soybeans (giving the receiver an opportunity to feed their own animals), or should we export the pigs after feeding them our own soybeans? It stands to reason that U.S. farmers would benefit if we first fed our soybeans to animals to produce meat, and then export this value-added meat product. Value-added products add employment and income to the country producing them.

Tariffs and trade issues are a lot to digest; there are many ways to view and value them. Agriculture trade is one bright spot in our nation's overall trade balance, as most recent estimates place agriculture with a positive trade balance of $21 billion.

The bottom line is that the U.S. still leads the world in the production of agricultural products—and we need a market to sell these products. Anytime U.S. agriculture takes an economic hit, all jobs that rely on it also take a hit, from equipment sales and service providers to the financial sector. Local tax bases that depend and support schools, roads and hospitals in our communities also suffer. iBi

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