In 1980, President Jimmy Carter issued an agriculture embargo on the Soviet Union for the invasion of Afghanistan. The result of this embargo on a country that at the time was a major importer of U.S. goods led to a collapse of the agriculture economy. It labeled the United States as an unreliable supplier of goods and was the first to weaponize food, and it helped create Brazil as an agriculture powerhouse.
Loss of trade partners coupled with depressed prices and land devaluation along with hikes in interest rates helped cause the farm crisis of the 1980s. Many farmers lost their farms to foreclosure over something over which they had little control.
Now, we are in Afghanistan, and food weaponization is being used again, along with tariffs against U.S. farmers and ranchers but in reverse. Still, the effects are the same. America being labeled as untrustworthy has caused a loss of agriculture trade partners.
First, the trade war with China has meant the loss of the No. 1 user of soybeans. Recent agreements have been announced that China will take around 5 million metric tons of soybeans this year. This pales to pre-tariff amounts of between 32 and 37 MMT in previous years.
Meanwhile, as in the 1980s, Brazil (No. 1 exporter of beans to China) will up production 10 percent to fill the gap. Argentina will also step in to replace U.S. production.
The administration’s decision to pull out of the Trans-Pacific Partnership in favor of doing bilateral trade has not materialized. Australia has moved within TPP to make bilateral agriculture deals with Japan. Their agreement with Japan gives Australian ranchers a 37 percent tariff advantage in beef trade over U.S. producers. Also, Australia made a deal on wheat to Japan that will again put U.S. wheat producers (which supplies 53 percent of Japan’s wheat imports) at a disadvantage.
The deal already struck — rebranding the North American Free Trade Agreement as the United States-Mexico-Canada Agreement — is much ado about not much. Canada has agreed to open its dairy markets to 3.6 percent. We could have gotten, within the TPP, a 3.2 percent share, but that would have included 11 other nations. Mexico, the No. 1 user of U.S. dairy, still has a 25 percent tariff today on dairy products from the United States.
The rhetoric against Mexico angered our southern neighbors so much they started building docks to receive corn from Brazil. Mexico is also the No. 1 user of U.S. corn.
When negotiating with Canada and Mexico, the administration had the two countries that complained to the World Trade Organization about our country of origin labeling. It caused Congress to remove the best promotion and educating tool for America’s cattlemen and consumers.
Instead of taking on a move that helped drop profit margins in cow/calf production from $438 per cow in 2015 to $162 today, negotiators got nothing.
The president would rather talk about a wall to divide us and our trading partners while allowing hundreds of thousands of cattle to cross both the northern and southern borders and immediately become “product of the U.S.A.”
A $12.1 billion market facilitation program payment to help farmers from the loss of trade did little to offset the increase in cost of production of $11.9 billion and rising as interest rates rise. Foreign-owned hog corporations were eligible for payments. However, American cattlemen received nothing from this program.
As “Tariff Man” steers us from one trade war to another with our best customers, farmers are left sitting in the back seat watching our competitors pass us by. Understanding that trade wars can disrupt normal relationships for years, we can only hope that we don’t return to the 1980s era of foreclosures because of the administration’s undefined policies of how we are winning.
Darvin Bentlage is a Barton County farmer and rancher.