By Roger Morris Special to Delaware Business Times
Talk of trade war has loomed over the economy for the past several months, but have those fears become a reality for Delaware farmers?
"Sure, they have,'' said Delaware Secretary of Agriculture Michael Scuse, in late August. "It's affecting us big time. In the last 90 days, the Chinese have already cancelled quite a few orders for our soybeans."
As China retaliates against U.S.-imposed tariffs, trade relationships closer to home may also change with the possible renegotiation of North American Free Trade Agreement (NAFTA).
Delaware farmers are closely following the talks with Canada and Mexico, which are both major export markets for Delaware agricultural products.
Delaware ranks 47th out of 50 states in total farm acreage. But it places No. 13 in barley production, 27th in soybeans, 29th in corn for grain and 31st in winter wheat. Chicken production for meat is even more impressive - eighth among all states in broiler poundage and 11th in total numbers of birds.
Much of this agricultural production feeds into foreign markets.
According to Richard Wilkins, who has a soybean farm in Greenwood and who is a past chairman of the American Soybean Association, Delaware farmers are being hit three ways by the Trump administration's self-proclaimed trade wars: the closing of hard-won markets, lower prices for soybeans and soybean meal, and higher prices for farm machinery and parts because of tariffs on imported aluminum and steel.
"When there first was talk about the risk of possible tariffs, the price of soybeans and other agricultural commodities went on a downward trend," Wilkins said. "Then we were hit with a 25 percent tariff on soybeans by China in retaliation for U.S. imposed tariffs on Chinese goods."
While China itself is suffering economically because of the trade war, Wilkins said he believes that country took the president's economic threats seriously when they were first made over a year ago.
"China usually is buying soybeans from Brazil during our summer months and less from us," he pointed out. "But last year, they were buying U.S. soybeans during the summer in addition to what they were getting from Brazil. Additionally, China has also been opening other markets for its non-agricultural goods and depending less on the U.S. market."
"I don't have a crystal ball, but I think they were preparing to withstand a trade war," Wilkins added.
Other world markets beyond China face threats as well. "Mexico is our No. 1 market for export corn, and that could be affected by the NAFTA talks," Scuse said.
A lot of corn and soybean meal is shipped directly by rail to Mexico to support its beef and poultry growers.
"So far, there have been no problems with Mexico, and they have indicated they prefer us as a trading partner," Wilkins said. At the same time, "They are sending us a message by buying more crops from Brazil that we aren't their only source of these commodities."
In the short term, neither Scuse, who was briefly acting U.S. Secretary of Agriculture under President Obama, nor Wilkins see short-term relief for Delaware farmers.
"The USDA is desperately looking to open other foreign markets," Scuse said, "because it's difficult to get much relief in the domestic market."
For poultry farmers, the present international trade situation looks much better. "Currently, China is already out of our picture," said James Fisher, communications manager for the Delmarva Poultry Industry Inc., pointing out that a dispute over avian flu and other issues had already closed China's doors for the past few years. "Hong Kong is our top market, with about $16 million in sales," he said. "NAFTA partners Mexico and Canada are next, with $13 million in sales to Mexico and $10 million to Canada."
In total, Delaware poultry exports, mainly chicken parts including feet or "chicken paws," total about $99.3 million, or almost a third of its $3.4 billion in total sales. In fact, Delaware-grown chickens have a far-flung marketplace beyond its top three - Kazakhstan, Vietnam, Chile and Jamaica. Even Cuba, a newer market, accounts for almost $5 million in sales. The state has five processing plants to feed these markets.
Other international trade issues impact Delaware agriculture producers. The U.S. dollar has strengthened while many currencies have seriously weakened, resulting in higher prices in these countries for American produce.
"There are also non-tariff trade barriers that other countries impose," Wilkins said. "For example, we castrate our bulls to make it safer for workers to be around them, then we give them hormones," Wilkins says. "But Europe won't allow beef imports having artificial hormones, although they haven't given scientific proof that there's a problem."
Similarly, American chickens are washed with an antibacterial agent before processing to kill deadly salmonella. "And the European Union prohibits this for imports, even though they haven't shown that it's a health issue." He and other farmers see these measures as forms of international protectionism.
Wilkins said that he's been farming since the 1970s and has built up equity to survive this crisis, as he has past crises. "But who I really feel sorry for are young farm families just getting started and highly leveraged. It will be difficult for them."
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