The impacts of potential trade tariffs on crops such as soybeans would send ripple effects through other agricultural commodities, according to Texas A&M AgriLife Extension Service economist, Dr. Mark Welch.
Welch, grains marketing economist in College Station, told farmers at the Central Texas Small Grain Field Day at the McGregor Research Center that a Purdue University economist recently projected a 25 percent import tariff by China soybeans would result in a 37 percent decline in U.S. exports.
Consequently, a decline in U.S. soybean exports would lead to fewer soybean acres.
“Where are those acres going to go? They will go to corn,” Welch said. “Given where our corn prices are, we don’t really want any more corn acres.”
From decreased land values to lessening farm net worth, the potential repercussions of tariffs on exports to China could have big impacts, Welch said.
“All of this highlights the fact that these trade implications really do matter to production agriculture,” he said.
Currently, wheat farmers projecting 45- bushel per acre yields at $5 per bushel can cover their costs and make some profit.
“That works,” he said. “But if you cut that yield by 25 percent, you’ll need $6.50 a bushel to make it work. That’s why we need to pay more attention to marketing activities.”
Welch said to mitigate potential price risks, producers can integrate cash marketing with other marketing tools and crop insurance.
“What we need to do is sit down and develop a map, a marketing plan based on production and price objectives,” he said. “This approach widens the marketing horizon from pre-plant to post-harvest, providing guidelines that manage marketing opportunities. Run the numbers. What if I sell some grain, but don’t have a crop in the ground? What will my revenue projection be?”
Welch proposed a couple of scenarios that stabilize farm revenue, even the ability to hedge crop insurance indemnities in the face of downward price risk and poor production prospects.
“This gives you the opportunity to protect increased farm revenue in a low-price, low-yield environment,” he said.
Welch said his marketing newsletter outlines strategies producers might consider. To receive the newsletter, email Welch at [email protected]
“We all know production and prices are going to impact your farms this year,” he said. “We are not hopeless, just sitting back and watching the markets. We can be proactive in developing plans.”
The day’s program was hosted by the AgriLife Extension crop committees in Bell, Bosque, Coryell, Hamilton, Johnson, Falls, Limestone and McLennan counties.