Trade discussions between the United States and China resumed Tuesday months after talks initially dissolved. However, the lack of a deal, over one year into the trade war continues to leave Arkansas farmers with a surplus of crops and fewer vendors to sell them to. This combined with an above average amount of rainfall has led to a bad couple of years for farmers without a permanent solution in sight.
An economic roundtable discussion held by the University of Arkansas Division of Agriculture Research and Extension on Tuesday, had two main takeaways for farmers: to not depend on payments from the Market Facilitation Program and to begin considering alternate ways to run their business so they rely less on China to purchase their product.
According to data from the Foreign Agriculture Service, only 24 percent of the United States’ soybean exports went to China in 2018. That’s down from 62 percent in 2016. Data on Arkansas agricultural exports as of the week of July 18, showed sales to China down in every category. Cotton sales are down by just over 900,000 bales, while soybeans are down by 508 million bushels.
"That’s a major problem for us. China has long been our top customer. So, if you look at their share…if you look at 2007 to 2016, China’s normally been 58 or 59 percent of our exports sales of beans. This year, 24 percent," Extension economist Scott Stiles said.
U.S. Representative Rick Crawford also attended the discussion. Speaking to the crowd, Crawford acknowledged the difficulty farmers are currently going though, but also said the trade war with China was inevitable.
"This had to stop. The president drew a line in the sand and look this is not about steel. This is not about soybeans. It’s about a much bigger picture, much longer term," Crawford said. "Our long-term strategic planning is generally five years. Theirs is 50 to 100 years. They think differently than we do, so we have to think a little differently if we’re going to not allow them to emerge as the preeminent economy and potentially the preeminent military power in the world."
Another future source for a lesser soybean demand from China is the emergence of the African Swine Flu since the crop can be part of a pig’s diet. According to Stiles, the company Cargill says the recovery time for the swine flu is not short term.
"This is not a six-month trend for China recovery. This is a 24-month, 36-month kind of resetting of the world’s population of animals," Stiles said.
One temporary form of aid is the Market Facilitation Program. Due to the agricultural losses from the trade war last year, the federal government provided monetary assistance to qualifying farmers by the amount of crops they produced. According to data from the Farm Service Agency, a part of the USDA, the MFP paid a total of $208 million to farmers in Arkansas in 2018. Stiles said the MFP program has helped out farmers “tremendously.” The USDA is continuing the program for 2019. However, unlike payments that are secured from the federal Farm Bill, the MFP payments cannot be relied on by a year to year basis.
"It’s a bridge to a trade deal with China and perhaps other countries…in Japan and other trading blocs so don’t count on it becoming a permanent cash flow," Stiles said. "Secretary Purdue continues to remind us, 'Don’t count on this next year.' He said that after the 2018 payments, but we’re again, trade issues with China are not resolved. But if that works out over time then MFP is not something you can continue to count on." Crawford also spoke on the lack of permanence of the payments.
"Growers need to be aware that this is a band-aid as we talked about earlier. This is a band-aid solution to try to bridge the gap between here and there," Crawford said.
This year, payments are based on acres planted in 2019. According to the USDA, in order to qualify, applicants must either "have an average adjusted gross income for tax years 2015, 2016 and 2017 of less than $900,000," or "derive at least 75 percent of their adjusted gross income from farming or ranching." The window for Arkansas farmers to apply for the Market Facilitation Program runs from July 29 until December 6.
Stiles also presented a chart indicating the acre payment rates for each county in Arkansas. The payments range from $48 per acre in Benton County to $109 acres in Desha County. In addition to not relying on the MFP payments on a yearly basis, Stiles also recommended farmers begin to diversify their selling options, especially considering there is not an established end date to the trading war.
"Your dad, your grandad…they diversified their operations with crops and livestock. That may not be practical today. What can we do to diversify being less reliant on China?" Stiles said.
The trade war is not the only thing that has negatively impacted farmers in the past few years. Above average amounts of rain were also cited as damaging to crops and revenue. In an article published last November by the University of Arkansas System Division of Agriculture, Stiles and along with two others estimated the economic impact of the above average rainfall on soybeans would be around $77 million. However, after factoring in the nearly 87% of product that had damage discounts and the estimated additional tilling costs, the updated number was instead around $88 to $100 million. The above average rain and flooding from this past spring were not discussed.