U.S. suppliers for agricultural production are building up stockpiles of the Chinese chemicals that farmers use to control pests and improve yields – before new more-than-double tariffs on those Chinese products kick in on Jan. 1.
The additional chemical tariffs are part of the ongoing trade war between the world’s two biggest economies which impacts $250 billion worth of Chinese goods and $113 billion in U.S. products to varying degrees.
The impositions could be disadvantageous to supply chains originally set up by U.S. firms that sell chemicals and fertilizer, part of a U.S. agricultural chemical industry valued at about $28 billion. The U.S. producers need to buy from China 40 percent of the ingredients and materials used to make farm chemicals, according to market-research firm Information.
As the biggest agricultural supplies provider in the U.S., Nutrien Ltd is building up farm chemicals storage sufficient to get through the busy 2019 planting season, the company said in a statement. Nutrien is accumulating chemical inventory valued $300 million more than a year earlier.
Other suppliers are doing the same and those who have the means to stock up will do so, said Daren Coppock, CEO of the Agricultural Retailers Association.
Elevated tariffs on farm chemicals would worsen the U.S. agricultural industry that has already seen a plummet in prices of staple crops thank to the tit-for-tat trade war between the world’s top two economic powers. The Chinese government has imposed taxes on U.S. crop imports including soybeans – leading to a remarkable decline in export worth $12 billion in 2017.
The Trump Administration slapped 10 percent tariffs starting Sept. 24 on about 5,700 items of imports from China and is going to substantially raise the duties to 25 percent on Jan.1, which adds cloud to a meeting expected between Trump and Chinese President Xi Jinping at the forthcoming G20 summit in Argentina.
Trump has lately released a wish to relax the tensions with China, saying on Nov. 16 that higher tariffs may not be needed.
However, some small U.S. chemical producers said they have already brought prices up to account for the current stalemate.
The prospect of higher pesticide costs on top of weak crop prices is “worrisome,” said Joe Ericson, president of the North Dakota Soybean Growers Association.
The U.S. farmers who used to sell soybeans to China in the past years have to now pile up the oilseeds in barns, leaving them just rotting, as the world’s biggest soy buyer has instead turned to alternative sources such as Brazil.
“We’re hit probably more than anybody with the Chinese tariffs,” Ericson said.
U.S. farmers have spent less on buying chemicals and fertilizer in the wake of new tariffs, are tailer source said.
U.S. soy farmers spent $52 per acre applying chemicals and fertilizer in 2017, or 12 percent of their total costs, according to data from the U.S. Department of Agriculture.