Soybeans: China trade war 'couldn't come at a worst time' for South Dakota bumper crop

Usually a bumper crop is a good thing. Not this season. Not for South Dakota soybean growers.

This year, what could have been a dream harvest has turned into a slow-moving nightmare.

The U.S. Department of Agriculture estimates South Dakota will produce a record amount of soybeans this harvest – 277 million bushels, up 15 percent from last year.

Usually China would gobble up the state's soybeans. But the country has curtailed its purchases of American soybeans, putting soybean growers on the front lines of the escalating trade war between the U.S. and China. 

"We're going to produce a record amount of soybeans in South Dakota this year, and the trade war couldn't have come at a worst time," said Brandon Wipf, A Huron soybean farmer and a board member of industry group American Soybean Association.

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Wipf said soybean growers are meeting contracts made prior to the start of the trade fight and looking for the best cash price for their crops from local elevators. But without the hungry Chinese market driving demand, elevators aren't looking to buy.

"The local grain elevators, their cash bid is extremely ugly," Wipf said "I don't even look at it anymore day to day, to be honest, because it's just telling the farmer, 'Don't sell soybeans to us right now.'"

That means a lot of soybeans are going to storage. But that's a problem, too. There's not a lot of storage space for the bumper crop. Neither farmers nor elevators are used to storing soybeans, which means they're ending up in piles on the ground, exposed to the elements, putting parts of the harvest at risk.

It's a loss that some growers could struggle to sustain and one that elected officials and others worried could tank the state's economy.

"It's a very sub-optimal position we've been put in here," Wipf said.

Not shrugging off concerns anymore

The financial hits come after a growing season of uncertainty.

The trade war has already cost South Dakota farmers and ranchers hundreds of millions of dollars, experts said, as the value of their crops has dipped amid international concern about new tariffs.

Matthew Elliott, South Dakota State University assistant professor and Extension agribusiness specialist, said many farmers planted their largest-ever soybean crops earlier this year, expecting the trade front to settle down.

"The market generally shrugged off a lot of the rhetoric during the early planting period," Elliott said. 

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Then on July 6, the Trump administration imposed 25-percent tariffs assessed on $34 billion of Chinese goods in what it says is an effort to level the playing field for American farmers, workers and companies. 

When those set in, China lashed back with tariffs against the United States in the same amount.

While prices for corn, soybean and pork had softened since the tariffs were first announced, commodity markets had seemed optimistic about trade war concerns.

Then came the threat of another set of tariffs. Days after the first set of tariffs set in, Trump threatened $200 billion in additional tariffs on Chinese imports.

Scott VanderWal, president of the South Dakota Farm Bureau, said he and his peers held out hope that Trump could negotiate a good deal for the United States. But apprehensions about a trade war were mounting.

While many agreed that trade partners have been taking advantage of the United States, they worried that Trump's approach was too broad, VanderWal said. And until a deal can be struck, farmers and ranchers were left to bear the brunt of the retaliatory tariffs.

"It's not pretty," Elliott said. "The longer it goes on for, it's not going to be pretty at all."

Trump offers few words of comfort

In an interview with KELO-TV during a Sioux Falls visit to stump for Kristi Noem, Trump sounded a positive note for growers.

"Whether it's soybeans or corn or any of it, I think the farmers are going to have a much bigger market, but I have to get the trade deals done," Trump said. 

He cautioned that a good deal would take time to craft. Then, Mr. Trump said he would slap additional tariffs on $267 billion in Chinese goods, widening a trade war between the two countries. 

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"Well, they would've lost them anyway because they were being hurt so badly by the trade barriers," Trump told KELO. "We will tell you they are going to be in a very good position soon."

But those words are a small comfort to many soybean growers, Wipf said. The harvest season has begun.

Even if a trade deal got signed tomorrow, it wouldn't solve growers woes. China is already buying soybeans elsewhere. And even if China re-opened its markets to U.S. production, the glut of product heading to market would create a logjam on U.S. railroads.

There's no deal in sight, so soybean growers are doing the best they can to meet existing contracts and wait for the market to open back up, he said. That's not a money-making proposition.

"It's going to have long-lasting second and third-order effects that I'm not sure that enough people have thought through," Wipf said. "There are some nervous bankers, I know that."

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