C Magazine - Fall 2018

Talking Trade

2018-11-16 03:06:34

As harvest rolled across the U.S., the Chinese tariff on U.S. soybeans put the squeeze on storage and available export markets. CHS Government Affairs has been closely monitoring the political winds on both sides of the ocean, beginning long before February 2018 when the tariffs were rumored. The CHS Board of Directors and cooperative system grain marketing leaders recently ramped up the dialogue through high-level briefings with policymakers, influencers and media representatives.

On Oct. 3, CHS Directors C.J. Blew, Scott Cordes and Perry Meyer met with the U.S. Senate Agriculture Committee, the offices of Minnesota Senators Amy Klobuchar and Tina Smith, and staff at the U.S. Department of Agriculture, the Office of the U.S. Trade Representative and the White House Office of Public Liaison. Joining them were John Griffith, senior vice president, CHS Global Grain Marketing and Renewable Fuels; Chris Pothen, vice president, CHS Global Grain Marketing North America; and the CHS Government Affairs team.

“We challenged decision-makers to think about the short- and long-term impacts on farmers, local cooperatives, local bankers and others who serve the industry,” says Cordes.

Pothen says the CHS teams in grain marketing, agronomy and processing will continue watching how the tariffs influence 2019 planting decisions and the market’s attempts to absorb significant soybean carryover volumes — three times a normal year’s carryover. “Our message was to encourage the administration and Congress to pursue agreements that open up more market access for our farmer-owners.”

— Annette Degnan

Tariff Impact Update

John Griffith, senior vice president, CHS Global Grain Marketing and Renewable Fuels, and John Engelen, vice president, CHS Government Affairs, provided this update on the impact of the trade impasse on farmers and cooperatives.

Q. What is the CHS position on the trade situation?

Engelen: CHS believes the U.S. government must work to expand market access and pursue policies that ensure fair competition and a level international playing field for U.S. farmers and ranchers. A vibrant and competitive export environment is critical to ensure fair market value for American products. We urge Congress and the administration to recognize the impact of trade policy changes on agriculture and find a comprehensive, thoughtful resolution to the trade situation that provides fair and open markets over government assistance.

Q. How is the supply chain responding?

Griffith: Since a resolution wasn’t reached, we’ve seen problems with getting this year’s harvest to market. This level of uncertainty has hurt farmers’ ability to plan harvest logistics, identify space allocation, determine storage rates and create shipping schedules. The slowdown in U.S. grain flow to China is also having a negative effect on efficient use of the supply chain infrastructure.

Engelen: Tariffs, retaliation and market access issues touch the entire cooperative system. In some cases, important export markets have been cut off ; in others, the price of commodities and other products has dropped dramatically. That shrinks the grower’s bottom line. And when tariffs are applied on products imported by the cooperative system to serve farmers, the system’s cost of doing business increases.

Q. Apart from price and movement, what are the short- and long-term concerns?

Griffith: Short term, fear of the unknown and abrupt changes will create market volatility and risk. Long term, the competitiveness of the U.S. farmer in the world market is at risk and that may affect production decisions. Those decisions can adversely impact the supply chain, which was built under a set of assumptions based on a free market.

Q. Won’t other buyers step up to purchase U.S. soybeans?

Griffith: China is the largest buyer of U.S. soybeans. Historically, we’ve shipped large amounts of soybeans to China in the fall. Shipments the rest of the year were relatively constant at a lower volume. With market access coming at a steeper price, we face shipping soybeans at a consistent rate year-round. We no longer have price-competitive soybeans for China, and American farmers and businesses are forced to price our soybeans low enough to compete with the rest of the world. Ultimately, we’ll export fewer soybeans.

— Rebecca Lentz

Published by CHS Inc. View All Articles.

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