China’s tariff list takes aim at Texas farmers and ranchers
SAN ANTONIO — Wayne Cleveland of the Texas Sorghum Producers started Wednesday “wondering if we’re going to have a commodity at the end of all this.”
The grain was on China’s list of 106 U.S. products targeted for hefty new tariffs - a retaliatory response to the Trump administration’s crackdown on what it views as unfair trade practices. China’s latest round of 25 percent tariffs hits rural Texas and America hard, as it includes beef, cotton, wheat, and sorghum as well as corn and soybeans.
Sorghum is a popular feed for Chinese pork and duck meat producers that want to avoid genetically modified organisms, GMOs, that are commonly found in U.S. produced corn. U.S. sorghum producers were already subject to an anti-dumping investigation.
Sorghum exports to China have soared — from $0 in 2011-2012 to nearly $1.5 billion in 2015-2016 — making it an even more important market than Mexico.
“We were a market that was groomed by China,” Cleveland said.
South Texas sorghum grower Bobby Nedbalek said it appeared China might be buying as much as it could to avoid a feed shortage.
“It’s my understanding that there’s like 15 or so boatloads of grain sorghum that are destined for China,” he said. “The bottom line is that at this point they’re going to load all those ships, I think, before they impose any kind of tariff.”
Sorghum wasn’t alone. China’s proposed hit list was a nightmare to the U.S. soybean industry, as farmers last year exported $12 billion worth of the product to China, making it the biggest U.S. agricultural export.
Zero Hedge, an English language commodity blog, said the inclusion of soy was a surprise that “opens the door to a new, third round of tariffs by the U.S., which would assure that a ‘nuclear’ trade war has indeed broken out.”
While Texas isn’t a big soybean grower, it is a top producer of cotton, wheat, corn, beef and sorghum, all of which are targeted.
“On that list were all the commodities that are critical to Texas producers,” Cleveland said. “I mean, you couldn’t have picked a list of commodities that were more representative of our growers.”
Unlike Monday’s immediate imposition of 25 percent tariffs on $3 billion worth of exports including U.S. pork, the $50 billion in annual exports identified by China’s Ministry of Commerce is for now a threat. The latest list is pending U.S. action on 1,333 Chinese products such as flat-screen televisions, semiconductors and medical devices.
U.S. Trade Representative Robert Lighthizer said the tariffs won’t go into effect until after a May 15 public hearing and a public comment period ending May 22.
“I wouldn’t call it a trade war just yet, but it is escalating and yes, targeting some of the products that are important for U.S. farmers,” said Texas A&M University agricultural economist Luis Ribera. “We export about 90 percent of our cotton and the majority is produced in Texas. We export close to 50 percent of our soybeans and China is, I believe, our No. 1 market. Beef, the same thing. It’s more important for pork but beef is still important.”
“Soybean farmers lost $1.72 billion in value for our crop this morning alone,” American Soybean Association President John Heisdorffer, an Iowa farmer, said in a statement. “That’s real money lost for farmers, and it is entirely preventable.”
Plains Cotton Growers spokesman Steve Verett said China last year reported purchase of $980 million of U.S. cotton lint, one of the listed products.
“I don’t think any of us have enough information at this point to be able comment as to what this ultimately will mean,” Verett said. “However, it certainly appears that the cotton market today is indicating some real concern with the announcement.”
While Agriculture Secretary Sonny Perdue said President Donald Trump told him to “assure your farmers out there that we’re not going to allow them to be the casualties if this trade dispute escalates,” the tariffs seemed designed to hit Trump’s rural American voter pool.
Trump took eight of the 10 states that are the largest producers of soybeans and three have Senate seats targeted by Republicans.
“We view the inclusion of soybeans in today’s announcement as political in nature and reflective of the escalation of the trade dispute with the U.S.,” Goldman Sachs analysts wrote in an investors note that predicted market gains for Latin American farmers. “Soybean tariffs impact U.S. Midwest political swing states and come at a cost that China appears willing to pay.”
While Trump himself tweeted that any trade war with China “was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” commodity groups issued news release after news release urging him not to hold them hostage.
“It is unsettling to see American-produced beef listed as a target for retaliation,” said Kent Bacus, director of international trade and market access for the National Cattlemen’s Beef Association, which fought years before regaining access to Chinese consumers in 2016. “This is a battle between two governments, and the unfortunate casualties will be America’s cattlemen and women and our consumers in China.”
Texas farmer Wesley Spurlock, chairman of the National Corn Growers Association, noted that agriculture is one industry with a positive trade balance.
“Instead of new protectionist policies, our nation’s focus should be on growing market access and promoting expanded trade from our most competitive industries,” he said. “We need to be measured, professional and business-like in our approach to keeping the trade doors open with China. Equally important, we need the president to understand the implications that these trade actions have for America’s farm families.”
In the meantime, Cleveland said, growers will struggle with planting decisions and doubling down on efforts to get adequate safeguards in the upcoming farm bill.
“This is the reason we need a safety net,” he said. “We’ve become a political football.”