North Dakota Soybean Farmers, Caught in the Trade War, Watch the Season Run Out on Their Crop10/15/2018
Snow was dusting out of the steel-colored sky as Monte Peterson stared out his home office window at the North Dakota land his family has worked since the 1950s.
“We’re having November weather in October,” the 60-year-old sighed.
The words were delivered in a no-nonsense deadpan, but a sense of urgency was working through the fourth-generation farmer. The clock was running. Timelines were collapsing. Each unseasonably wet day was a delay, keeping Peterson and his four-man crew out of the 4,500 acres, representing millions of dollars of soybeans, they need to harvest by Halloween.
But there is another problem facing farmers in the Sheyenne River Valley, 60 miles west of Fargo: They are snagged in the trade crossfire between Washington and Beijing.
For the past decade, North American soybean production has exploded, driven by an intense demand from China. Peterson and other Great Plains farmers directly fed the overseas markets, harvesting more than 243 million bushels in North Dakota, at a price of $2.1 billion in the last market year. The majority of that crop fattened Chinese livestock.
But in July, the Trump administration announced 10 percent tariffs on more than $200 billion of imported Chinese goods. Beijing responded with tariffs on $60 billion of American products – including soybeans.
The escalation essentially hit pause on what had been a rollicking international market for North Dakota’s farmers. When Peterson pulls his soybeans from the ground, he’ll have no one to sell most of them to.
“What does a farmer do to respond to that when we’re in the middle of a growing season? We can’t just go out and rip up the crop and find something else to sell,” Peterson said. “It’s not like we’re creating widgets here. You can’t just speed up or slow down the production line.”
Nancy Johnson, executive director of the North Dakota Soybean Growers Association, put the number of “orphan soybeans” at 236 million bushels.
The soybean plight has become a flashpoint in elections in the heavily Republican state, including the battle between Sen. Heidi Heitkamp and GOP challenger Rep. Kevin Cramer. But the situation also has tested Peterson’s – and other farmers’ – support for President Donald Trump, who carried the deep-red state by 36 percentage points.
“He’s the president of the United States and he deserves our support,” Peterson said on a recent morning at his farm. “But I can’t help wondering about the methods he’s using with regards to trade.”
The history of the Peterson family farm tracks with the soybean industry’s rise in North Dakota. When Peterson grew up here, his father had mainly planted hard red spring wheat. Other crops – barley, sunflowers – were mixed in over the years. But soybeans soon began dominating fields across the state.
“The real turning point in the market came in 2000,” when China joined the World Trade Organization, said Johnson, of the Growers Association. “We really saw our acreage start to increase dramatically then.”
The crop’s explosion was driven by the emerging Chinese middle class. Chicken and beef were suddenly in demand and livestock producers fed their animals soybean-based meal. China’s agriculture, however, could not supply enough homegrown soybeans to meet the need.
North Dakota was uniquely positioned geographically to serve China. Soybean producing states to the south, such as Louisiana and Arkansas, ship their crops from ports on the Gulf of Mexico, where they can easily serve South American markets but face a long haul to Asia. North Dakota farmers, however, can get their crops to ports in the Pacific Northwest by rail in four days. From there, the trip across the Pacific to China takes a little over two weeks by boat.
According to Johnson, by 2000, North Dakota farms were producing 60 million bushels of soybeans. Ten years later, the number had jumped to 145 million bushels. In 2014, the level rose to 200 million bushels. As of 2017, two-thirds of the North Dakota soybean crop was going to China.
“We had one country with imports that exceeded the 10 largest other country imports,” Peterson said. “We had all our eggs in one basket with China. It isn’t that we wanted that, or that we didn’t recognize it. But when demand comes that heavy from one area of the world, you try to address it.”
But because the North Dakotan market has been geared specifically for Chinese imports, growers are now left wanting.
The federal government has announced up to $12 billion in relief; the U.S. Department of Agriculture’s Market Facilitation Program will pay for half the acreage soybean farmers harvest.
But those payments won’t come until the crop is out of the ground – and the soggy weather soaking North Dakota recently has delayed harvest.
“Lots of guys will be scrambling,” said Joe Ericson, a grower who operates a 5,000-acre farm near Wimbledon. “It’s going to be a struggle. This year might not be as bad because a lot of guys have forward-contracted a lot of this year’s crop already. But if it goes into next year, it could be tough for soybean.”
Peterson has about 25 percent of his crop under contract with a buyer and will store the rest. Many farmers in the region have begun dusting off old bins for storage. Others are hoping to build new storage facilities for the overflow, but steel and aluminum tariffs have driven up construction costs.
“We’re getting hit by both sides of the equation here,” he said.
Peterson said the Chinese were good trading partners. “But were they fair trading partners? That’s another question,” he said.
He had hoped – and still hopes – for action from the Trump administration.
“I am fully supportive of working toward more free and fair trade,” he said. “What I am totally opposed to is the use of tariffs.”
Others echo Peterson’s unease with Trump’s trade tactics.
“It needed to be done but I don’t know it needed to be done in this by, by using agriculture as a tool,” Ericson said. “We’re a red state, so they were voting for him no matter what. But I think that’s changing a little bit. This could affect the Republicans here.”
In the U.S. Senate contest, Cramer has supported the administration’s actions. Heitkamp, who has trailed in recent polls, has criticized her challenger for being out of touch with the state’s agriculture industry.
The farmers themselves are waiting out the international discord, hoping the tariffs are lifted before the new year, when bank loan payments come due. Until then, there are fields to harvest – at least when the weather clears.
Cold temperatures sweeping over the plains, however, have meant more unseasonable snow.
“Now it looks like the middle of January out there,” Peterson said.
This article was written by Kyle Swenson, a reporter for The Washington Post.
Source: Kyle Swenson, Agweek