Talking tariffs and trade wars and the general upsetting of the USDA apple cart, I’ve noticed a trend among farmers.
Older farmers? They’re fine with the chaos. They’ve been waiting a long time for someone to really shake things up. They’re sitting comfortably on land they own and figure, “Bring it on and reset everything.”
Young farmers? Not so much. They’re more leveraged, maybe working two jobs, and far more likely to think, “Oh crap, what’s this going to look like in five years?”
Jonathan Coppess tells me that absolutely makes sense.
“What does the Chinese soybean market look like in 10 years? That’s a different question if you’re 25 or 30 than if you’re 65 or 70,” says Coppess, an ag policy professor at the University of Illinois who also was administrator of USDA’s Farm Service Agency in a past life.
But back to the chaos. Uncertainty is never good for any business, especially yours. As I write this, China has a 25% tariff on U.S. corn and a 30% tariff on soybeans, counting various additional duties. That could go away five minutes from now. And then come back. And then go away again.
Good luck keeping up.
Coppess says it’s easy to criticize President Donald Trump’s use of tariffs as a punitive mechanism, even if we knew it was coming because he straight up said he would do this. It’s also easy to criticize the resulting whipsaw effects that tariffs have on markets and the economy, and the deals to negotiate tariffs that are lower than last month but still higher than a year ago.
That’s the world we live in today.
But what about down the road? Coppess says we focus far too much on the near-term effects of tariffs, and far less on the long-term damage. But to be fair, have we ever seen big policy decisions take long-term damage into account? Not really.
Bailed out, passed on
Coppess, a self-proclaimed history nerd, says we’ve seen this before.
“In 1973, when [President Richard] Nixon had that brief soybean embargo, Japan started to invest in Brazilian production and kept it up over time. Brazil ultimately became this huge competitor for the U.S.,” Coppess explains.
Japan had legitimate reasons. No country wants to be food insecure. So, they look for other markets.
That creates questions about the long-term outlook for American farmers — specifically American young farmers. How do farmers compete in a world that’s busy securing non-American markets?
That’s just one unintended consequence of a trade war. Big-dollar government bailouts are another. Farmers and lenders may welcome another cash infusion from Uncle Sam, but to what end? When farmers get a bunch of bailout money, the input market has a harder time correcting itself to realign with lower commodity prices. Those dollars often pass right on through to your landlords and suppliers.
“The promise of payments just becomes a pass,” Coppess says. “It will be harder to ask your landlord to cut your cash rent when they know you’ve gotten a big government payment.”
Plus, ag economists say payments mean farmers wind up considering payment opportunities when they decide future crop rotations. That’s not market-driven farming.
Sure, payments stop the bleeding. But payments may be the medicine that helps in the short term — and hurts in the long term.
In the end
These are real issues, and they beg real questions and healthy debate.
What do we want farming to look like in 10 years? How can we create markets and avoid bailouts? Can we encourage more innovation?
The next generation wants a new way of doing things. They’re looking at crop rotations, systems practice change, cover crops, different cropping ideas, biologicals. They don’t want to do what Dad did, the way Dad did it. How can we encourage that?
Innovation can only flourish when markets and global trade are unfettered and not whipsawed by short-sighted trade policies. Businesses, innovators and entrepreneurs thrive when certainty reigns. We need a White House and Congress that will re-dedicate themselves to decisions that let innovators succeed and free markets run their course.
Most important, we need leaders who understand that starting a trade war has consequences. These decisions do not exist in a vacuum. Nixon’s embargo sparked the Brazilian ag juggernaut, which eventually moved the U.S. farmer into second place in the soybean export race. If you tariff China, it will find other suppliers.
It’s a big world out there. We’re not the only game in town, and we need policy that gives all farmers the chance to compete.
Comments? Email holly.spangler@farmprogress.com.