Surprise: Don’t count on American farmers voting for Democrats in the midterm elections. Of the handful I’ve spoken to over the last week that have a horse in the race in November, the Republican gets their vote.
Despite 25% tariffs imposed on their soybeans by the Chinese government in retaliation for U.S. tariffs, soy farmers have already picked sides. The winner is Trump, though no one in farm country is giving him a standing ovation for his trade war with the Chinese.
Michele Aavang is one of the soy farmers that got caught in the crossfire. She farms over 1,600 acres outside of Woodstock, Illinois, not far from the Wisconsin border. Food-grade soy all goes to Japan. Common soy, about 50% of it, is exported, and China gets the bulk of it. A registered Republican, when asked if she would vote for a Democratic in hopes to get the trade war overturned, she said she would vote for incumbent Republican congressman Randy Hultgren.
Her hopes on Trump negotiating an end to tariffs before they began have been dashed.
“We were hoping things could be negotiated prior to enacting the tariffs, but that didn’t happen,” she says. “I hope this will be settled quickly. I heard we are running out of runway.”
The soy harvest starts in October. Farmers need to know what’s going to happen with tariffs by then—will they stay or will they go? Most are now betting on tariffs staying. “We need to know. We need some stability to make decisions for next year’s planting because that’s when we are buying fertilizer and booking our fuel. We need to know where the soy we used to sell to China is going to go.”
China is the world’s biggest soy buyer.
The U.S. and Brazil are its biggest markets.
The trade war came at a tough time for farmers. A record soy crop in Brazil and record acreage of soybeans in the U.S. sent soy prices to their lowest levels in 10 years.
“Tariffs absolutely hurt our bottom line,” says Derek Sawyer, a soy farmer in McPherson, Kansas. “I’ll admit that China has been problematic, and I get the sense we needed to do something. But we worked really hard over the last decade to build relationships with them. Tariffs knock our efforts back about ten steps,” he says. “Buyers don’t know who to buy from: more expensive Brazil, or stay here and pay the tariff. If you book Brazil and the tariff goes away, you’re getting soaked. The uncertainty is incredible,” he says.
But like Aavang, he’s still voting for Republican congressman Roger Marshall when he comes up for reelection in November. His wife works for Marshall.
On Tuesday, Trump promised some $12 billion in aid to help farmers reeling from low commodity prices. Some Republicans criticized the spending package.
“President Trump has promised since day one that he had the back of every farmer and rancher,” Secretary of Agriculture Sonny Perdue told reporters yesterday. The assistance is a short-term solution, but gives the “Trump administration time to work on long-term trade deals,” Perdue said.
The announcement came hours after the president proclaimed on Twitter that “Tariffs are the greatest!” The aid will be facilitated through the Commodity Credit Corp, an agency set up during the Great Depression, and will not require congressional approval. Congress is currently working on a Farm Bill.
China’s 25% tariff means it will have to look to Brazil or pay higher prices for U.S. soy. Brazil soy premiums have shot higher as a result, meaning China is paying more for Brazilian soybeans anyway. Its other options include much smaller markets in Russia, Ukraine and Kazakhstan.
Soy that Brazil would have shipped to Europe will end up going to China, and U.S. soy that might have gone to China will just end up going to Europe instead, industry analysts say.
“Soy prices are falling because of Brazil’s record crop and record planting of soybeans here,” says John Baize, a market analyst with the U.S Soybean Export Council. “There is always a challenge getting soy out of Brazil, and there is more of a premium now than there was a year ago. We are cheaper here and will be shipping more to Europe and Southeast Asia. Tariffs made for a trade shift,” says Baize.
Farmers remain cautiously optimistic.
Monte Peterson, a soy farmer in Valley City, North Dakota, said it was too early to tell if he would vote Republican or not in the midterms.
“I think this will work for the benefit of the country long term, but I have my reservations,” he says, feeling much like a casualty in the U.S. China “trade war.”
“I’m seeing market disruption already. Our customers in China are worried about our ability to be a reliable supplier,” he says. This would only be the case if the U.S. cut back on soy acreage or signed longer supply agreements with Europe at the expense of traditional Chinese partners who may be buying more from Brazil instead.
Like Aavang and Sawyer, Peterson said that if this were 2020, and the tariffs were still in place, and soybeans were still just under $9 a bushel, and the economy was still humming along, he’d vote Trump.
What if it was Trump versus Bernie Sanders? He was a rock star back in 2016. All the kids loved him. Peterson let out a chuckle. “No. I still prefer low taxes and capitalism,” he says.
