Trade war and sagging prices push U.S. family farmers to leave the field

Recently, I wrote of the significant increase in farmer bankruptcies in several states. Already in a fragile state, the trade wars have pushed an increasing number of family farmers into bankruptcy.

In a Reuters article entitled “Trade war and sagging prices push U.S. family farmers to leave the field,” bankruptcy is not the only path forward for these farmers.

The article begins “Shuffing across his frozen fields, farmer Jim Taphorn hunched his shoulders against the wind and squinted at the auctioneer standing next to his tractors. After a fifth harvest with low grain prices, made worse last fall by the U.S.-China trade war, the 68-year-old and his family were calling it quits. Farming also was taking a physical toll on him, he said; he’d suffered a heart attack 15 months before.

Across the Midwest, growing numbers of grain farmers are choosing to shed their machinery and find renters for their land, all to stem the financial strain on their families, a dozen leading farm-equipment auction houses told Reuters. As these older grain farmers are retiring, fewer younger people are lining up to replace them.”

This a key reason tariffs and trade wars need to be well thought out and avoided whenever possible. Tariffs usually cast a wider net on the lives of people and business, harming far more than those intended for them to help. These farmers are one audience that is harmed.

The additional troubling aspect is the slow and lengthy impact tariffs and trade wars have on sales and supply chains. These chains are built on relationships. I often quote a CFO who echoes what I observed in 30 plus years of business that CFOs like predictable costs maybe even more than lower costs. Tariffs and trade wars upset that paradigm.

We must help our farmers, especially the family farmers. We also must make more thoughtful decisions with input from people in the know. Why? People are impacted, so we need to make sure we understand the scatter-fire of pulling the trigger on a change.

Advertisements

Farm bankruptcies on the rise

There have been numerous stories on the rise in farm bankruptcies in 2018. Picking one from December 1, 2018 in the Lincoln Journal Star by Matt Olberdin called “As ag economy continues to struggle, farm bankruptcies rise,” through October, bankruptcies in a seven state region including and around Nebraska are up 45% compared to all of 2017.

Trade issues and low crop prices are two main issues driving down farm incomes. Coupled with rising interest rates and property taxes, and it is a tougher road for farmers. Per PBS Newshour, trade issues means tariffs getting in the way of the farmers’ markets.

These farmers use Chapter 12 bankruptcy that makes it easier to file and reorganize. This approach allows a higher debt limit as well. Per The Wall Street Journal, farm bankruptcy filings are the highest they have been in ten years.

As with the shutdown, real people are impacted by ill-conceived decisions by the President. Loyalty to a President becomes tough when you cannot feed your family and may lose your livelihood. With the tariffs blocking markets for the farmers’ products, the buyers must look elsewhere. These farmers will have to dump product or let it go to waste.

This is a key reason economist say trade wars cannot be won. More people lose than win on targeted tariffs. Yet, this does not seem to bother the man in the White House. That is troubling and sad for our country.