Trump’s trade war is draining profits for Montana wheat farmers

Today’s agricultural producers battle both environmental threats and geopolitical conflict.

 

Michelle Erickson Jones poses for a photograph in front of a tractor and grain silos at Erickson Farm in Broadview, Mont.
Matthew Brown/AP Images

On a hot August day in southern Montana, Michelle Erickson-Jones climbed onto her green combine, a massive machine that reaps and separates ripe grain. August is harvest season, so Erickson-Jones was focused on gathering the mature wheat on her farm and preparing it for sale. “We cut somewhere around 250 to 300 acres a day,” she told me over the phone, even as she maneuvered the combine through a field. All told, she and her family spent 21 days collecting wheat this year — a good harvest.

Despite that bounty, problems arise once the wheat is sold. Ongoing international trade disputes are causing Montana wheat farmers’ earnings to stagnate. With around half a million dollars in operational costs and less than $25,000 in subsidy payments from the federal government, Erickson-Jones, a fourth-generation farmer, will not make a profit this year. “It’s been three years since I’ve drawn anything but a break-even budget, and that’s hinging on good (wheat) production,” she said.

This struggle to make ends meet is shared by many Montana producers. Along with environmental threats like heat waves and flooding, today’s farmers must contend with the chaos of modern political conflicts. With the U.S.-China trade war in its second year and international agricultural relationships uncertain, “It’s really hard to make any kind of profit,” said Lyle Benjamin, a farmer and president of the Montana Grain Growers Association. As a result, farmers “are taking a real, hard look at whether they really want to stay farming or not.”

American farmers depend on international trade. The U.S. is one of the world’s largest agricultural exporters, shipping over 20% of its farm-grown products overseas each year. In Montana, wheat is the state’s biggest agricultural commodity, with farmers exporting $565 million worth in 2017.

Much of Montana’s wheat goes to Japan. But the future of that longstanding relationship was thrown into doubt in 2017, when the U.S. withdrew from the Trans-Pacific Partnership, a now-defunct trade agreement among 12 countries, signed in 2016. The deal that replaced it would tax U.S. wheat at a higher rate than Canadian and Australian wheat, starting in April 2020, putting this vital market at risk, said Steve Mercer, vice president of communications at the U.S. Wheat Associates. The Montana Wheat and Barley Committee, a lobbying group, estimates that the withdrawal is costing Montana wheat farmers around $150 million annually. However, a new trade deal the U.S. and Japan are negotiating now may retain the country’s equal footing with Canada and Australia, preserving Montana’s top wheat market. 

The ongoing U.S.-China trade war is putting additional strain on Montana farmers. Since early 2018, President Trump has imposed tariffs on more than $250 billion worth of Chinese goods, from steel to textiles. China retaliated with tariffs on $110 billion of U.S. products, including soybeans, corn and wheat. And both countries have announced additional taxes, set to begin in September. The back-and-forth hikes have caused the price of a bushel of Montana wheat — which typically hovers around $5.50 — to drop by $0.41, said Benjamin.    

Nationwide, farmers’ economic losses have totaled billions of dollars; in response, the federal government last year started doling out subsidies through the Market Facilitation Program. Farmers and ranchers across the country have received about $8.59 billion since then, 84% of which has gone to Midwestern soybean farmers as of April, according to the Great Falls Tribune. Montana farmers, on the other hand, received less than 1%. This year, farmers and ranchers across the country impacted by the tariffs are receiving at least $15 per acre. These payments will make up for soybean growers’ short-term losses, “but that will not be true of all producers everywhere,” said Patrick Westhoff, director of the Food and Agriculture Policy Research Institute at the University of Missouri.

No thorough analysis has been done on how the subsidies impact wheat farmers specifically, but “you’d be hard-pressed to find a farmer who would say that this program fully offsets what they lost in sales from the tariffs,” said Josh Tonsager, vice president of policy and communications at the National Association of Wheat Growers.

Along with the immediate concern of revenue losses, this trade conflict may also provoke more lasting problems. The subsidies are “not a sustainable approach for having a healthy U.S. farm economy,” said Amanda Countryman, an associate professor in agriculture and resource economics at Colorado State University. China is the largest export market for U.S. agricultural products, and payments to farmers can’t compensate for the erosion of that relationship, or the trust that was its foundation, Countryman said; the payments are merely a “Band-Aid on a much deeper wound.” 

And the trade war between the U.S. and China shows no signs of stopping. With Trump hinting at his regrets about the continuing trade conflict last weekend, just 48 hours after he pledged to raise tariffs on China, farmers are uncertain about the next round of U.S.-China trade negotiations, scheduled for September. It may still be a while before producers like Erickson-Johnson turn a profit. “I would like to keep operating,” she said, but the trade war “definitely puts a little bit of a dimmer on the future of agriculture.”

Helen Santoro is an editorial intern at High Country News. Email her at [email protected] or submit a letter to the editor.

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