Tariffs wiping out American farmers on all sides, and farm equipment manufacturers are laying off

This is a transcript, for the video found here:

Bullets:

The trade wars are ripping through the farm economies of the United States and Canada.

High tariffs on fertilizers and equipment are driving up input costs for American farmers, and retaliatory tariffs on US farm crops threaten to extend years of losses.

The farm equipment industry is also getting slammed. Suppliers are attempting to raise prices as a result of tariff-related higher parts costs, but farmers are delaying new purchases.

This is especially notable in Canada, which is the number one export market for American manufacturers of ag equipment.

The North American farm sector is already reeling, as China has enjoyed record wheat harvests, and successfully moved its food supply chains to friendly countries in the BRICS bloc.

Report:

Good morning.

Back in April, the American Farm Bureau issued a press release about the new tariffs that were coming from the Trump Administration. It noted that American farmers lost money on major crops for the past three years. Twenty percent of farm income in the United States is from exports, and American farmers need to buy fertilizer and equipment from foreign suppliers. The new tariffs will drive up the cost of farm inputs, and farm exports will fall because of the retaliatory tariffs put on by everyone else.

We give credit where it’s due, and everything Zippy Duvall here was warning about is now headline news today.

The export markets for American farms have disappeared. There is no other way to say it. The BRICS countries – namely Russia and Brazil, are having no problem supplying markets that used to be served by American farmers. President Trump hopes that China will dramatically increase its buys of American soybeans, and that the Chinese are quick about it. He urges China to quadruple US buying, and says that China is concerned about a soybean shortage here.

Two things stand out right away. China’s shipments of soybeans from the US are zero, so four times zero doesn’t do anything. There’s also not any evidence in the markets that there is a shortage of soybeans anywhere, let alone in China. Soybean prices keep falling, and China is getting all the soybeans they need from Brazil, and now from Argentina. Market analysts know that supplies from just those countries are sufficient to cover whatever China needs.

At the moment, Brazilian soybeans are more expensive than American beans, and that’s because of the harvest schedules. The North American harvest will begin in September, and the market is pricing that in—that massive volumes of soybeans will hit the market that, so far, there aren’t a lot of buyers for. China hasn’t ordered any US soybeans for this harvest season.

Across global markets, US soybean sales are the lowest level in almost 20 years. The buyers aren’t there, crop prices are plunging, and everything on the input side costs a lot more because of the tariffs. Fertilizer prices are going up, along with costs for tools and machinery. Phosphate and potash imports are down 20% from last year, as prices are going way up. US farms saw a 35% price increase in just this year alone for fertilizers.

The tariffs are also hitting capital spending for heavy equipment. AGCO is a major manufacturer of farm tractors, and they’re raising prices, along with their competitors. And that is hitting demand.

Farmers are holding off, waiting, before making big capital commitments for new farm equipment. Again, the high tariffs are causing big problems that are bad enough, but nobody has any clue what the tariff rates will be tomorrow, or what the tariffs even apply to, today. Canadian farmers don’t know whether or not American-built machines are subject to Canada’s retaliatory tariffs, and nobody wants to find that out the hard way.

They’re pulling back, and manufacturers are cutting production. Equipment makers don’t want to build up inventory, only to learn later that the equipment is going to cost a lot more than they thought for the end buyer, and so it doesn’t sell.

The negotiations for these machines take a long time—they involve high up-front cost, then warranties, service and repair guarantees, discounts for fleet purchases. Nobody on either the buy side or the seller wants to go through all that trouble just to learn that the cost is going to be a lot higher, for something, that they didn’t budget for. For example, maybe Canada clarifies the rules and allows these new tractors to be sold, exempt from their retaliatory tariffs. But what about the replacement and repair parts? Will those have high tariffs, or not? Nobody has any idea. So this farmer from Manitoba speaks for a thousand guys just like him. He buys equipment from everywhere, and he doesn’t know the prices of anything anymore, so he’ll just keep using the older equipment he’s already got.

Thirty percent of ag equipment built in the United States is exported, and Canada is the biggest market for it. The Canadians aren’t buying, and Case New Holland announced big layoffs for their plants in North Dakota and Minnesota. And we might suppose that would be a boon for Canadian equipment makers, but they’re getting hit too. Honey Bee is a Canadian manufacturer, and they’re also cutting back production. Supply chains are complex, and manufacturers need components and parts sourced abroad to build their equipment, and all those costs are going up.

And remember, these Canadian farmers have the same problem American farmers have got. China is seeing record harvests on their own farms—this year’s harvest of summer wheat is just slightly below last year’s, which was a record, and is a major contributor to falling wheat prices everywhere. And China is moving its supply chains around for whatever they’re not growing enough of themselves, to friendly countries. Russia, South America – and even Kazakhstan now – they’ve have stepped up to satisfy global demand—not just for China--and fill orders that used to go through Australia and North America.

Be Good.