- The agriculture sector is struggling in wake of a trade war between the two largest economies.
- Tariffs have sent agricultural prices lower and halted shipments from the US.
- American agriculture exports are expected to drop by $US1.9 billion this year, according to new estimates from the USDA chief economist.
Seven months into a trade war between Washington and Beijing, the US agriculture sector is in jeopardy.
Tit-for-tat tariffs between the largest economies have lowered commodity prices and handed market share over to other countries. American farm exports are expected to drop by $US1.9 billion during the 2019 fiscal year, according toDepartment of Agriculture chief economist Robert Johansson.
Businesses across the country, especially within the farming sector, have warned of losses resulting from trade barriers. Here are a few of them:
Deere & Co.
With farms putting investments on hold in wake of tariffs, Deere & Co. warned this month that the trade war may sting the company if it continues. Reporting its first-quarter earnings, the largest tractor manufacturer in the world cut the profit estimate for its agriculture division.
“Our results were hurt by higher costs for raw materials and logistics as well by customer concerns over tariffs and trade policies,” chairman and chief executive Samuel Allen said following the results. “These latter issues have weighed on market sentiment and caused farmers to become more cautious about making major purchases.”
While Bayer could potentially benefit from rearranged trade flows – for example, if farmers switch from soy to corn – the company has said it would be harder to make business plans amid the trade spat between Washington and Beijing. Such uncertainty can weigh heavily on investment plans.
“The big unknown next year will be how U.S. farmers react to the Chinese-U.S. trade war,” Liam Condon, the head of Bayer’s crop science division, told Reuters in September.
This month, Bunge reported a $US125 million loss on the back of uncertainty related to the tariffs. The company had bet on rising premiums for Brazilian beans, which rose and then fell dramatically in value following the start of the trade war.
“They will do whatever else they have to do not to buy US soybeans,” Soren Schroder, chief executive of the company, said of China in August, according to the Financial Times. “The export hole that the Chinese leave in the US will be bigger than anyone else can really replenish.”
Michigan Agricultural Commodities
The Alma-based Morning Sun reported last year that soybean plants in Michigan were feeling the impact of tariffs. At Michigan Agricultural Commodities, near-decade low prices had limited sales and exports.
“That is a hindrance to the company we ship to for export,” Adam Geers, a facility manager in Breckenridge, told the Sun in September. “We’re not exporting beans as a result of the tariff, to my knowledge.”
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