The deepening trade war between the US and China has roiled complex global supply chains and America’s Heartland. The latest breakdown in negotiations comes at a time when soybean exports to China have crashed, and huge stockpiles are building, have resulted in many farmers teetering on the verge of bankruptcy. Mounting financial stress in the Midwest has allowed a public health crisis, where suicide rates among farmers have hit record highs, according to one trade organization’s interview with the South China Morning Post.
Bill Gordon, a fourth-generation farmer in Worthington, Minnesota, who is also vice-president of the American Soybean Association, warned that spot prices for agriculture products have dropped so low, many in the Midwest can’t even service their debts or also pay their bills. Farmers are losing their land to creditors daily. This has triggered the suicide rate among farmers to jump in the last several years.
“The markets are so low, we cannot even break even to pay our bills. Farmers are losing their farms every day. The suicide rate among farmers is at an all-time high,” Gordon said.
“It is not up to us to tell the president how to negotiate, but a handout from the government is not how I want to run my business,” Gordon explained while talking about President Trump’s bailout of farmers and the possible use of the Commodity Credit Corp., a federal agency given authority during the Great Depression, to buy $15 billion worth of agricultural product from farmers.
“It took us 40 years to build these markets … and while no trade deal is perfect, for the most part the agriculture trade with China was on the up and up, or mutually beneficial,” he said.
Agricultural economist Scott Irwin, a professor at the University of Illinois Urbana-Champaign, told the Post that farmers right now are losing $50 to $100 on corn and soybeans per acre. This excludes the government bailout, he said.
Irwin believes the Trump administration will hand out checks to farmers rather than using the Commodity Credit Corp. to buy physical crops.
“They are likely going to roll out that Market Facilitation Programme and probably expand it because Trump believes he has plenty of money to cover any checks he is going to write the farmers,” Irwin said.
“Every developed country in the world subsidizes its ag sector,” he said. “We have an over 80-year history of doing that here in the US. If it is socialism, it is not new socialism.”
Soybean futures fell 25% in 50 weeks since the inception of President Trump’s trade war early last summer.
CBOT Soybeans futures plunged to their lowest level in a decade as China on Monday said it would raise tariffs on $60 billion in US goods in retaliation for Trump’s decision last Friday to raise duties on $200 billion in Chinese products to 25% from 10%.
Gordon emphasized that farmers are looking to compete on a fair and level playing field, and don’t want government bailouts during a time when spot prices drop.
“What we want people to understand is that we don’t want people to think we are complaining because we are not becoming super profitable,” he said.
“Today, If I plant soybeans, I’m guaranteed to lose $65,000 on this planting. I have to find that money from somewhere else just to get me back to zero.”
The trajectory on spot prices for soybeans is down despite several years of bumper crops in the Americas.
The 2019/20 farm crisis is a repeat of the 1980s crisis; farmers back then had heavy debt loads with high stockpiles. Once the US slapped the Soviet Union with trade embargos, crop exports to the country collapsed and triggered an agriculture recession in the Midwest. Very similar to today, Trump administration’s trade war forced China to respond with retaliatory tariffs on American soybeans, thus collapsing soybean exports to China by 80%. With the trade war deepening, financial stress in America’s Heartland will only increase, leading to a continuation of farmer suicides. The moral of the story: get government out of markets.