Russia feeds off Trump trade war while US corn-belt farmers suffer

[Tony Gosling]

Russia feeds off Trump trade war while US corn-belt farmers suffer

https://www.telegraph.co.uk/business/2019/02/17/russia-feeds-trump-trade-war-us-corn-belt-farmers-suffer/
David Millward 17 FEBRUARY 2019

For more than 30 years, Joe Peiffer has worked as 
a lawyer looking after farmers in Iowa, in the heart of the US corn belt.

He was raised on a farm and during the Eighties 
was a law clerk in a bankruptcy court during the 
last major US agriculture crisis.

Now he is watching history repeat itself with a 
wave of bankruptcies across the farm belt.

The number of Chapter 12 bankruptcies – a 
mechanism that allows family farms to restructure 
their debts – surged last year as the country 
paid the price for overproduction at a time when 
a rejuvenated Russia supplanted the US as the world’s leading wheat exporter.

Russia has muscled in on markets such as North 
Africa and the Middle East, which were once the 
preserve of the US. Thanks to its ability to 
undercut the US, Moscow is cementing its economic 
as well as diplomatic presence in the region.

The days of the collective farm and antiquated 
rusting equipment are long gone. Instead, the 
country’s farmers are boosting production with 
the aid of an iconic American company, John 
Deere, which opened a manufacturing plant in 
Domodedovo, 28 miles south of Moscow, in 2010.

Not only are American grain farmers battling 
against Russia’s lower production costs, but they 
are also falling victim to Donald Trump’s trade 
war with China, which saw Beijing impose 25pc 
tariffs on US goods including corn and soya beans.

While arable farming has taken the biggest hit, 
there is growing concern among meat producers 
about the rising demand for plant-based 
substitutes, whose sales increased 22pc to $1.5bn (£1.1bn) last year.

A report last year by the Congressional Research 
Service – which provides information for members 
of the Senate and House of Representatives – is pretty depressing reading.

It predicted that net farm income across the 
country as a whole would be substantially below 
the 10-year average and 31pc less than the record 
high of 2013 when it reached $135.6bn.

Farm expenses were forecast to increase by 4.2pc 
compared with 2017 and farm debt was predicted to 
hit a new high. In Iowa the picture is grim. In 
2013 only four farms in the state sought Chapter 
12 protection. By 2017, the latest year for which 
figures are available, the number had soared to 18.

“It is like, here we go again,” Peiffer says. “In 
some respects, it is tougher than it was in the 
Eighties when the price of real estate dropped 
and farmers could come out of bankruptcy and 
repay the entire value of their farm through a bankruptcy.

“Today land prices and rents have not dropped and 
there is really not enough profit raising corn 
and soybeans, which are the main crops here in Iowa.

“I am seeing a lot of financial stress, with many 
farmers unable to procure crop input financing, 
which they need for the 2019 crop to pay for 
seed, fertiliser, rent, fuel and labour.

“We are finding many banks have decided they are 
not going to make loans to their existing farm borrowers for 2019 inputs.

“Many cannot get financing and those who can have 
to go to secondary sources, which are far more 
expensive. Distressed farmers are paying 12pc 
interest rather than around 6pc and also having to pay additional fees on top.

“Stressed farmers are having to pay a lot more 
and that impacts on their ability to make money.”

Elsewhere, the figures are equally stark. An 
analysis by the Wall Street Journal showed that 
the Seventh Circuit Court of Appeals, which 
includes Illinois, Indiana and Wisconsin, 
recorded twice as many bankruptcies last year than in 2008.

A separate analysis by the Federal Reserve Bank 
of Minnesota reported 84 farms filing for Chapter 12 bankruptcy.

“Bankruptcies have been spiking and the reason is 
because prices are low, and have been low, going 
on four years,” says Ron Wirtz, the bank’s 
regional outreach director, who has investigated 
trends in Wisconsin, Minnesota, Montana, South Dakota and North Dakota.

“When prices are low, farm finances will be under 
stress, and the longer prices are low, the more farms will be affected.”

The halcyon days of only a few years ago are becoming a distant memory.

“In 2013 prices were high for corn, wheat, 
soybeans and dairy, which led to overproduction 
as smaller operators chased yesterday’s market,” 
says Dec Mullarkey, managing director of 
investment strategy at Sun Life Investment Management.

“Bankruptcies in Indiana, Illinois and Wisconsin 
have doubled since 2008. As we come into spring 
and farmers need access to funds ahead of the 
planting season, that is when failures could 
bubble up as banks become cautious.

“Now Brazil and Russia have come online and they 
are forcing prices down. They also have the 
advantage of lower production costs.” The pain is 
being felt by smaller businesses rather than the 
big conglomerates. In any case, the family farm 
is a dying species, with the number having fallen 
from six million just after the Second World War to two million today.

“The human cost is very significant,” says Roger 
Johnson, president of the National Farmers Union in Washington.

“There are increasing stress levels that have 
built up over time. There are a lot of reports 
suggesting mental health helplines are receiving 
a level of calls that are at least reaching, if 
not exceeding, that of the last farming crisis in the Eighties.

“Farms are dispersed and you have increasing 
isolation out there. Small manufacturing 
businesses have gone, which means there aren’t 
off-farm jobs for farmers or their spouses.”

Mr Johnson believes Donald Trump’s administration 
should shoulder much of the blame for the problems farmers face.

“The administration has picked trade fights all 
over the world and it is agriculture that has 
borne the brunt of those battles.”

It is a view shared by Ray Goldberg, professor of 
agriculture at Harvard Business School.

“It has occurred suddenly because of the policies 
that have taken place when our president decided 
to get tough on trade. In the process of doing 
it, he obliterated long-term relationships in the food sector.

“Once you lose these relationships, they are very hard to get back.

“The people who are affected are farmers because 
we are an exporting nation in agriculture.”

With the 2020 presidential election looming, 
Republican strategists are already showing signs 
of nervousness at the political damage a farming 
slump could do to Donald Trump’s re-election prospects.

In 2016 an estimated 75pc of farmers voted for 
Donald Trump and it was their backing in swing 
states like Wisconsin that helped propel him into the White House.

A Farm Futures poll last August showed that his 
support had dropped to 60pc, with 24pc saying 
they would not support his re-election.

They were particularly alarmed about trade, with 
only 8pc agreeing with the president’s assertion 
that trade wars were “easy to win”, while 40pc 
said the trade war had done permanent damage to agriculture.

Brandon Barford, a partner at Beacon Policy 
Advisors in Washington DC, has noticed that Trump 
is sensitive to the threat posed by a slump in farmers’ support.

“While we have traditionally thought of Trump’s 
behaviour as being bound by the movement in the 
Dow Jones Industrial Average, he has also been 
known to alter behaviour and policy based on 
farmer and farm-state members of Congress voicing 
their displeasure to him directly.

“Farmers are suffering even more now, so Trump is 
likely to use auto and auto parts tariffs to try 
to force the EU to include agriculture in the 
talks, to once again help to show his farming 
base that though it is bad now, he is fighting for them.”

To use current political parlance, the optics of 
a farming crisis hitting some of his most loyal 
supporters are potentially disastrous.

“Politically this could be significant,” adds Mullarkey.

“Agriculture is a significant lobby. There will 
be a rising number of hard-working people losing 
their livelihoods and that is a story that will grab the headlines.”













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'From South America, where payment must be made 
with subtlety, the Bormann organization has made 
a substantial contribution. It has drawn many of 
the brightest Jewish businessmen into a 
participatory role in the development of many of 
its corporations, and many of these Jews share 
their prosperity most generously with Israel. If 
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with a specially dispensed venture capital fund. 
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several years before our conversation, but with 
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than a millionaire, a quiet leader in the 
community with a certain share of his profits 
earmarked as always for his venture capital 
benefactors. This has taken place in many other 
instances across America and demonstrates how 
Bormann’s people operate in the contemporary 
commercial world, in contrast to the fanciful 
nonsense with which Nazis are described in so much “literature.”

So much emphasis is placed on select Jewish 
participation in Bormann companies that when 
Adolf Eichmann was seized and taken to Tel Aviv 
to stand trial, it produced a shock wave in the 
Jewish and German communities of Buenos Aires. 
Jewish leaders informed the Israeli authorities 
in no uncertain terms that this must never happen 
again because a repetition would permanently 
rupture relations with the Germans of Latin 
America, as well as with the Bormann 
organization, and cut off the flow of Jewish 
money to Israel. It never happened again, and the 
pursuit of Bormann quieted down at the request of 
these Jewish leaders. He is residing in an 
Argentinian safe haven, protected by the most 
efficient German infrastructure in history as 
well as by all those whose prosperity depends on his well-being.'
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