Soybean Tariff Hits Home For Louisiana Farmers

Aug 21, 2018

Soybeans are a $700-million dollar industry in Louisiana.  It’s the second largest row crop industry, just behind sugar cane. So when China imposed a tax on imported soybeans, it put a financial strain on farmers across the state. 

On the banks of the Atchafalaya River in Melville, most of Charles Cannatella's 4,000-acre farm is used to grow soybeans. You won't eat these soybeans in a restaurant or buy them at the grocery store. Instead, they’re shipped overseas where they're processed and used to make other products.

"They'll squeeze the oil out of it and it's used for cooking oil. And then the meal that’s left, that's used for feed, mostly poultry and pork,” explains Cannatella.

There are more acres of soybean planted in the state than any other row crop, most of which, Cannatella says, "is loaded right here in Baton Rouge and New Orleans and exported around the world.”

To places like China, the largest customer of American soybeans.

“About 60%  of total U.S. soybean exports are bought by China," says Michael Deliberto, assistant professor of agricultural economics at LSU.

“When you look at the level of soybean exports that come out of Louisiana," he says, "we mirror that percent. Probably 57 to 59% of Louisiana soybeans go to China.”

In July, China introduced a tariff on American soybeans, making them 25% more expensive for Chinese buyers. The move was a response to tariffs announced by President Trump on Chinese goods.

“A tariff is designed to place a tax on a good which makes that good less desirable by the country importing it because they're having to pay a higher price than otherwise,” explains Deliberto.

Earlier this summer, a bushel of soybeans was selling for about $10.50. That price quickly dropped by $2 when China’s tariff was announced.

Charles Cannatella says at less than $9 per bushel now, it's tough for farmers to break even.

“If you're fortunate enough to make an average crop or an above average crop, it takes about $10 for you to get your money back. That leaves you a little bit for living expenses, but not much,” he says.

On a farm his size - which produces more than 100,000 bushels a season - Cannatella says making $2 less per bushel of soybean can mean a big hit, as much as a quarter of a million dollars, which "goes a long ways when you have equipment breakdowns and old tractors, old machinery you need to update, but if you don't have that money you just don't do anything, you just hang on until next year.”

Louisiana's Commissioner of Agriculture and Forestry, Mike Strain, says while farmers may be feeling the pinch right now, he believes that trade negotiations will ultimately lead to higher soybean prices, putting more money in the pockets of American farmers.

“I know when you're looking at - you know - you don't have enough money to pay the bank, that's hard. That's very hard. But we can't - we cannot - back up now. We cannot because if we back up now then we will be at the mercy of China," says Strain. 

To help farmers getting hit by these tariffs, President Trump's administration announced a $12 billion aid package. Cannatella says instead of help from Washington, he’d prefer more stability in the market.

“Personally, I'd rather have my $2 back because I don't think I'll get much money out of $12 billion, if I get any. We'd rather have a good price per bushel and then we can deal with the rest, but you know, the uncertainty, it keeps you up at night.”

Still, he says he supports the President’s efforts to renegotiate trade deals.

“I think that's one reason you see Trump still has support in our area, in rural areas," says Cannatella, "but I don't know how long that last. I mean we can only hold out so long you know.”