by Dwain Hebda | Photography By Jamison Mosley
The superlatives to describe the challenges of 2019 for the state’s farm producers have nearly been exhausted – unprecedented, catastrophic, devastating. Arkansas’ producers have endured a two-front assault by a raging Mother Nature and an escalating trade war with one of the nation’s biggest agriculture customers.
Farmers are enduring what is shaping up to be one of the worst growing seasons in recent memory, thanks to weather conditions that forced the slowest start to the season in at least 25 years. This comes on the heels of a 2018 that already had soybean producers reeling.
“If you’ll remember, I think starting about the end of September, it took until July of 2019 for us to go a week without getting a shower across Arkansas,” says Matt King, director of public affairs and governmental relations with Arkansas Farm Bureau.
Just like any other commodity, soybeans command a price that’s impacted by quality. As Delta Farm Press reported late last year, aberrations to the growing cycle can dramatically impact the quality of the harvested grain and correspondingly, the price. The publication reported quality discounts as high as $2.50 per bushel being docked as a result.
“Those rain events really impacted the quality of soybeans that are coming out and with the lack of markets out there available, we had to store a lot of bad soybeans,” King says. “The market basically says they didn’t want those. We saw discount [price] schedules and things like that increase substantially.”
The continued weather chaos that opened 2019 wasn’t the only storm soaking farmers, as U.S.-Chinese trade hostilities continue to ferment. On July 6, the standoff reached the one-year anniversary of the countries’ first imposing matching 25 percent tariffs on goods. Subsequent actions came in August and September until both sides agreed to a temporary cease-fire in December, per the South China Morning Post.
Hostilities resumed in the new year with the two countries slapping additional taxes, tariffs and duties on one another’s goods until last month’s G20 summit in Japan when U.S. President Donald Trump and China’s President Xi Jinping again agreed to a trade war truce. However, that peace is uneasy, SCMP reported, as it came about only with China’s assurances to buy more farm goods. Thus far, that hasn’t happened.
According to the latest available data, China’s purchase of soybeans overall has tumbled – in part because of a swine disease that has reduced the amount imported for animal feed – and the U.S. share of that buy is shrinking fast. The paper reports China bought 7.36 metric tons of soybeans in May, of which only 980,000 were American-grown, supplanting U.S.-grown grain with Brazil’s, which supplied 75 percent of China’s soybeans that month.
King put the mounting crisis into even sharper perspective as it relates to Arkansas soybean growers.
“China normally imports about every third row of soybeans here in the United States,” he says. “That’s a significant part of what we produce that would end up over there. Half of our exports would end up in China and that market basically went away overnight.
“Now, we’ve done a lot of work trying to engage other markets. We’re seeing huge gains in countries in Europe, in the European Union and others,” he continues. “But they’ve still not offset those losses that we’ve seen in China. We’re still almost 12 million bushels behind, year-to-date, of where we were the year before just because of what we’re missing from China.”
Arkansas soybeans are particularly vulnerable, King explains, because 90 percent of beans produced are headed somewhere else. Arkansas’ limited processing facilities – known as a crush plant, which turns raw beans into meal or extracts their oil – hamstrings the state’s ability to produce more value-added products locally.
“The way the flow of grain works in the United States, they go north to south,” he says. “It doesn’t work for us to ship beans from Arkansas north to a crush plant and since we only have one facility to utilize [in the state], we can’t compete that way.”
Losing a major customer such as China on a prolonged basis also presents other issues, namely storage capacity. Arkansas’ export window largely closes after June as other countries’ stock hits the market and slower sales means excess grain that has to reside somewhere.
“We’re usually very front-loaded on soybeans, meaning in the first six months of our marketing year we would export an overwhelming majority of our soybeans,” King says. “I mean 70-80 percent of our soybeans would already be exported.”
The nation’s farmers have access to a variety of funding – from government programs to private crop insurance – to act as a hedge against weather and market forces. The most recent, unveiled last year, is the Market Facilitation Program which provided $12 billion last year for direct payments to producers and which was reimplemented in May for 2019, providing an additional $15 billion in payments to growers affected by the tariffs.
According to information by the U.S. Department of Agriculture, the program is authorized under the Commodity Credit Corporation Charter Act and administered by the Farm Service Agency. The MFP payment equals 2018 total production of the producer times 50 percent of the MFP rate, which ranges from a penny a bushel of corn to $1.65 per bushel of soybeans. Media reports place the number of Arkansas farmers receiving MFP payments through April at more than 400 and total payments at $281 million, per the state Farm Service Agency office.
Additional relief programs announced in May include the $1.4 billion Food Purchase and Distribution Program through the Agricultural Marketing Service to buy surplus domestic commodities affected by trade retaliation. Purchased fruits, vegetables, some processed foods, meat and milk will then be distributed by the Food and Nutrition Service to food banks, schools and other outlets serving low-income individuals. Plus, $100 million was earmarked by the Agricultural Trade Promotion Program to be administered by the Foreign Agriculture Service to help develop new export markets on behalf of producers.
While King says these programs are certainly helpful, they don’t make farmers whole, directly paying them a fraction of what their crops would bring on the market, and nothing for farmers who couldn’t raise a crop due to 2019 floods. For their part, farmers adjusted their planting strategy in 2019, at least as much as they could given the uncooperative weather.
“We saw farmers make the decision by what they planted last year and we saw them scale back on their soybean production in 2019,” King says. “The year before we were about 3.5 million acres; this year we’re just about 3 million acres of soybeans planted in Arkansas.
“We’re seeing additional acres of cotton go in because while cotton hadn’t been impacted by China there’s still other markets out there that are buying up this cotton so there’s less competition in the global market for those products. And with the corn market over the last decade, corn production has grown significantly in Arkansas.”
As for the ongoing tensions with the country’s largest customer, farmers naturally want to see the matter resolved. But, as King is quick to point out, polls indicate they don’t want market peace at any price even as the situation continues to eat at the bottom line.
“In Arkansas, we’ve got folks that are very concerned about this, about the way that the tariffs are having the largest impact on the agricultural community compared to other sectors of the economy,” he says. “But overall, there was a report done by Farm Journal two or three weeks ago that showed the president’s approval rating at 79 percent amongst farmers and ranchers across the United States.”
“For decades now [farmers] have been concerned about the way that the United States is taken advantage of on the international marketplace. Arkansas farmers have seen their products be denied. Rice products were not allowed into China. Beef products for the most part had to go around through Vietnam before they could get into China. They’ve seen these countries cheating and doing these things in the WTO [World Trade Organization] for a long time.”
At this, King pauses, then adds, “Our farmers want to see these markets open up, want to see free access to it; it’s taking a significant toll on the bottom line of agriculture. As we wrote in a letter to the president, one of our concerns in this is that yes, our farmers are patriotic, but we’re concerned that their bankers may not be as patriotic as they are.”