The Finance 202: Trump’s trade war keeps punishing farmers. But farmers remain optimistic.

Source: By Tory Newmyer, Washington Post • Posted: Thursday, August 8, 2019

Dairy and crop farmers across the Midwest are going out of business due to the Trump-era tariffs and the operating costs of farming, which have made it impossible to turn a profit. (Ricky Carioti/The Washington Post)

Investors who got socked by Monday’s steep stock market sell-off enjoyed a partial recovery Tuesday, as three major stock benchmarks each climbed more than a percent. For American farmers, the constituency most squarely in the crosshairs of the escalating U.S.-China trade war, relief won’t come so easily.

The Chinese Ministry of Commerce confirmed Monday that Beijing is canceling all purchases of U.S. agricultural goods in retaliation for President Trump’s pledge to slap 10 percent tariffs on $300 billion of Chinese imports. The move piles on to a punishing year for farmers, who’ve been assailed by a combination of bad weather and Chinese counterpunching in the trade war. Zippy Duvall, president of the American Farm Bureau Federation, called the announcement a “body blow to thousands of farmers and ranchers who are already struggling to get by.”

Trump, keen to keep faith with a stalwart portion of his base, signaled Tuesday that the Agriculture Department would hand out more aid next year to farmers suffering from trade-war-related dislocations — on top of the roughly $25 billion the administration disbursed last year or will this year:

The evidence suggests Trump is more accurately assessing farmers’ outlooks. Farmers’ confidence in the agriculture economy soared in July, according to the latest Purdue/CME Group Ag Economy Barometer, releasedTuesday:

The nationwide survey of 400 people in the sector found more than three out of four respondents believe the trade fight will be resolved in a way that benefits U.S. agriculture:

The farmers’ optimism may reflect relatively encouraging circumstances at the time of the survey in mid-July, says Jim Mintert, director of Purdue University’s Center for Commercial Agriculture. “Farmers did finally wrap up planting season, and it was a relief just to get done,” he said. “And the weather did improve: People were able to plant a reasonable portion of their acreage and could get a reasonable amount of their crop in the ground.” Prices for crops including corn and soybeans were looking up then, too.

Taking a step back, though, the damage that farmers have sustained from the trade war is impossible to miss. Agriculture exports to China, a top buyer of American produce, fell by more than half last year, the Wall Street Journal’s Jacob Bunge, Kirk Maltais and Lucy Craymer report: “In 2017, Chinese buyers imported $19.5 billion in farm goods. That dropped to $9.1 billion last year as China’s tariffs on U.S. soybeans, pork, milk and other products made them more expensive for importers there… Over the first six months of this year, China’s agricultural imports from the U.S. were down 20% from the same period last year.”

Farmers concentrating on certain crops have faired even worse. “From September 2017 to May 2018, soybeans exports to China totaled 27.7 million tons. That number dropped by more than 70% to 7 million tons during the same nine-month period in 2018 and 2019, according to an analysis by University of Missouri,” CNBC’s Kate Rooney reports.

And the new pressures from the trade war compounded what had already been a difficult stretch for the industry. “Net farm income has dropped by nearly half in the past five years, from $123 billion to $63 billion,” my colleague Annie Gowen reports. As a result, family farm bankruptcies have been rising at an alarming rate across the map:

Former Iowa Lt. Gov. Patty Judge (D) told CNBC that Beijing’s announcement creates a “dangerous situation” for farmers. “There are going to be some serious repercussions for farmers,” she said. And Mintert tells me he expects China’s move to weigh on farmer sentiment in Purdue/CME’s August survey.

But for the trade war storm clouds over farmers to lift, either Trump or President Xi Jinping will have to blink — and neither seem inclined to do so at the moment. The two sides are set for a September meeting in Washington to resume negotiations. Yet Xi, facing mass protests in Hong Kong and a slowing economy at home, appears loathe to be seen as backing down in his staring contest with Trump.

And Trump — stymied all summer in his attempts to secure Chinese purchases of American ag products — believes his aggressive approach is primed to deliver. “Trump is convinced that the Chinese economy is suffering more than the U.S. economy from the conflict,” The Post’s Damian Paletta reports. “And he has felt validated that his hardball threats in other circumstances, including a recent tangle with Mexico over border security, seemed to get at least some results, even if they scared investors in the short term.” To say nothing of farmers.