Farmers deal with plenty of uncertainty. For example, the 8 inches of snow that fell on Josh Gackle’s farm in Kulm, North Dakota, on the first days of April. But they’re used to managing that kind of uncertainty.
Adding additional uncertainty into the equation this year has been the back-and-forth from the Trump administration on tariffs that has been going on since early February. on all imports to the U.S. and higher duties on some of the country's biggest trading partners.
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Soybean farmers like Gackle, who serves as chairman of the American Soybean Association, know the cost of tariffs. When Trump’s first administration put tariffs on China, China retaliated with tariffs on a number of American products, including soybeans.
“Now with much broader tariffs with many of our trading partners, it just creates that added uncertainty, with not knowing quite what we’ll see,” Gackle said on April 3.
North Dakota State University Extension held a special edition of its series on Friday afternoon to explain what experts there are watching about tariffs and potential places of impact. Speaker after speaker talked of the uncertainty farmers like Gackle are facing, along with ranchers and agribusinesses in the U.S.
By Thursday, China had responded to Trump’s tariffs by putting an additional 34% tariff on U.S. products. Because of existing tariffs, Frayne Olson, NDSU Extension crops economist, said it appears the effective tariff rate on U.S. soybeans going to China will be more than 60%. While the speakers on the webinar said no one can know what will happen, Olson did have some advice for those with unsold and uncontracted 2024 soybeans.
“I think if you do have some old crop soybeans in the bin, I think that would be something I would be looking pretty seriously” at getting sold, he said.
The issued on Monday, March 31, already predicted lower soybean acres being planted this spring, and Olson said the tariff situation could shift even more acres out of the crop. But Gackle said it’s too late for most farmers to substantially change their plans in response to the tariff situation.
“Farmers for the most part have their planting plans in place. Seed, chemical, fertilizer, other inputs — most of those decisions have been made,” he said. “At this point, the first week of April, small grains will be going in the ground here shortly, and depending on the weather, corn and soybeans within the next month to six weeks.”
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During the 2018-19 trade war, the U.S. Department of Agriculture implemented the to assist farmers and ranchers who saw prices for their goods fall significantly. While those payments “helped fill part of the gap,” Gackle said it was more of a “Band-Aid” for some short-term loss of the trade war.
“We prefer open access to markets, free and fair trade and a price that at least meets our cost of production,” he said. “Our preference is not government payments.”
Unlike during the 2018-19 trade war, North Dakota now has several crush plants on line. But Olson said crush plants only will bid enough to keep necessary soybeans from leaving on a train. Crush capacity and storage capacity are limited.
“It will help but it will be minimal,” he said of the plants.
And on the ethanol side, David Ripplinger, NDSU Extension bioproducts and bioenergy economist, said Canada is the No. 1 customer for the U.S. If Canada retaliates against U.S. ethanol, that could affect the corn market.
The trade war with China in 2018-19 was not just a short-term hit to farmers. China started investing more with Brazil, putting money up for new ports and other infrastructure.
“Of course, Brazil is the No. 1 competitor when it comes to providing that, and these trade disputes with other countries just continue to incentivize folks that we have been trading with to look elsewhere,” Gackle said. He appreciates the Phase One trade deal with China after the 2018-19 dispute, “but … we still haven’t fully recovered what we had there as a market.”
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Olson said the longer the tariffs last and the longer supply chains are disrupted, the more likely it is that alternative supply chains — including China buying more soybeans from Brazil than the U.S. — will become more stable and reliable.
“It becomes much more difficult to switch back,” he said.
Inputs and the cost of doing business
During the webinar, Bryon Parman, NDSU Extension agricultural finance specialist, explained the difference between “reciprocal tariffs” and “retaliatory tariffs.” The reciprocal tariffs put on by Trump are limited to what is needed to deal with “perceived unfair or harmful policies” of other countries. Those tariffs will have an impact on things like input costs of products coming into the U.S., like potash and agrochemicals, the majority of which have active ingredients manufactured in full or in part in other countries, as well as steel and aluminum used in equipment and parts.
Retaliatory tariffs refer to tariffs put on by countries in response to another country’s actions. Those, he said, can be “punitive in nature,” and are not limited. The impact of retaliatory tariffs could be felt in demand and thus commodity prices. China’s retaliatory tariffs could have a major impact on soybeans, in particular, but also other crops and livestock. That includes cattle, of which Tim Petry, NDSU Extension livestock economist, said China has been the No. 3 customer for the U.S.
But there are also other forces at work in the export market to China, with China already cutting off U.S. packing plants from shipping there in March as a protective measure for the country’s own beef industry, Petry said.
The tariffs and trade war also could be felt in the economy, with possibilities of recession, inflation rate hikes and other impacts, Parman said.
What happens next will be determined by many factors, the NDSU experts said, with things like the length of time tariffs are in place and other countries' responses playing a role. Right now, Olson said soybeans are a main ag focus. But if other countries put on retaliatory tariffs, that could change. And Petry said the feeder cattle market was limit down on Friday, April 4, and faces an expanded limit on Monday, which could indicate a big shakeup in what has been a .
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Adding additional uncertainty is the possibility that the U.S. will put , in some form, on vessels from China. Matt Gammans, NDSU assistant professor of agricultural policy, said depending on how fees are put in place, that could increase the cost of getting agricultural goods exported from the U.S. Petry said that could be a factor on the beef market, where cuts of meat that are unpopular in the U.S. often are sent to other countries. Added shipping costs could make that less profitable. Announcements on those port fees are expected later in April.
Ag groups are working to continue to build and maintain global connections. Farmers, through checkoff programs, have been investing for years in building market access around the globe. Gackle said the American Soybean Association and U.S. Soybean Export Council — along with other commodity groups — will continue to maintain relationships with buyers in other countries and try to prove the U.S.’s reliability as a trading partner.
“We’re hoping that this leads to maybe some bilateral trade deals and other ways U.S. farmers and U.S. ag in general can be part of a positive trade relationship with other countries,” Gackle said. “But we’re — as farmers — somewhat stuck in the middle of bigger political and trade discussions between the United States and a number of other countries.”
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