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Insight: Trade war backfire - Steel tariff shrapnel hits U.S. farmers

Reuters  |  KANE COUNTY, Ill. 

By and P.J. Huffstutter

KANE COUNTY, Ill. (Reuters) - Lucas Strom, who runs a century-old family farm in rural Illinois, canceled an order to buy a new $71,000 grain storage bin last month - after the seller raised the price 5 percent in a day.

The reason: prices jumped right after U.S. announced tariffs.

Throughout U.S. farm country, where Trump has enjoyed strong support, tariffs on and aluminum imports are boosting costs for equipment and infrastructure and causing some farmers and agricultural firms to scrap purchases and expansion plans, according to Reuters' interviews with farmers, manufacturers, construction firms and shippers.

The impact of rising prices on agriculture illustrates the unintended and unpredictable consequences of aggressive in a global And the blow comes as farmers fear a more direct hit from retaliatory tariffs threatened by on crops such as sorghum and soybeans, the most valuable U.S. agricultural export.

in Maple Park, - the seller of the storage bin Strom wanted to buy with a neighboring - raised its price two days after Trump announced aluminum and tariffs on March 1 to protect U.S. producers of the metals. Strom and his neighbor backed out.

"Would that price destroy us? No," Strom said. "But these days, you have to be smart about your expenses."

The metals tariffs also hitting makers and sellers of farm equipment, from smaller firms like A&P Grain to global giants such as and Such firms are struggling with whether and how to pass along their higher raw materials costs to farmers who are already reeling from low commodity prices amid a global grains glut.

The world's two largest economies have threatened each other with tariffs on tens of billions of dollars of goods recent weeks.

Trump imposed tariffs of 25 percent on and 10 percent on aluminum in a move mainly aimed at curbing imports from He has since temporarily excluded the and six other allies from the duties and given them until May 1 to negotiate permanent exemptions.

A&P Grain said the used in their bins is made in the United States, but domestic prices also have soared because of the tariffs.

mills typically adjust their prices once a year, normally in the first quarter, Altepeter said. But this year, those prices have jumped four times, he said.

The price of used in A&P's grain bins has jumped about 20 percent since January 1.

"Any time there's any type of negative talk that affects the mill, they've raised the price," said Altepeter.

Last year, about 95,000 tons of was shipped to the agriculture industry, compared to the 14 million tons for the U.S. auto industry, according to the American Iron and Institute, an group.

Other factors had been driving up prices before the recent trade disputes, including an improving global and accelerating and construction, particularly in the U.S.

The referred questions from to the U.S. Department of Agriculture, which did not respond to a request for comment. Trump and have vowed the will protect farmers from China's tariffs, but not explained how.

U.S. farmers can ill-afford any loss of sales. Farm income has dropped by more than half since 2013, following years of massive harvests that have depressed prices for staples such as corn and soybeans.

U.S. competitors Brazil, and have all raised grain output in recent years, eating into the U.S. share of global markets. imported ten times more corn from last year and is set to buy even more in 2018 on worries that renegotiations of the NAFTA trade pact could disrupt their U.S. supplies.

Strom said he has also pushed back plans to build a new storage building to house his planter and the combine head he uses for harvesting corn and soybeans. Other farmers, producers and beer makers have scrambled to finalize deals for steel-based equipment before prices climb more.

CONSTRUCTION POSTPONED

In Riverton, Illinois, said he postponed construction of a new $800,000 storage system for grain after Corp's unit increased prices by 15 percent.

Entwistle, who voted for Trump, will instead store corn in bags on the ground.

"Trump keeps telling us he's going to get a better deal," Entwistle said. "When are we gonna make it better?"

said Trump's tariffs will raise its costs and make price hikes to customers unavoidable.

"As the entire grain storage has weathered increased prices, and are constantly looking for new ways to maximize efficiency and minimize the impact to customers," said

Other companies, including Deere and Caterpillar, are also facing pain from rising prices, which account for about 10 percent of equipment manufacturers' direct costs.

Deere told last month the company will have to absorb the price increase and cut costs elsewhere. China's threatened tariffs on U.S. crops could hurt the company even more by undermining demand from farmers, he said.

"This has a huge effect on livelihood of the right now, and at the same time it has a huge impact on manufacturers," said Dennis Slater, at the Association of Equipment Manufacturers, an group.

farm income is forecast to drop to $59.5 billion in 2018 dollars, down from $64.9 billion in 2017, an 8.3 percent decline, according to the USDA.

TARIFF 'DOOM-AND-GLOOM'

In Sheffield, Iowa, has seen prices soar 40 percent since November, said Brent Hansen, the company's

The maker of grain bins and buildings has encouraged customers to buy quickly before prices jump more. But some have already postponed projects, Hansen said.

"That's obviously a big price increase for an that's a little bit doom-and-gloom over tariffs," Hansen said.

Sukup used to give customers up to two months to consider its bids for projects. Now, it allows just a week in some cases because of volatile prices, Hansen said.

Prices have jumped by 25 percent for thermal insulated panels that keep cold - which can use either steel, aluminum or both, said Glenn Todd, owner of The company has built processing and storage facilities for Bumble Bee Seafoods and poultry company

Richard Adkins, at in Mukwonago, Wisconsin, thought his company wouldn't have to worry about Trump's tariffs. Most of the they use to design comes from and Mexico, he said, and the has exempted both countries from the levies.

It didn't matter. Price-hike notices from vendors landed in Adkins' mailbox days after Trump announced the duties.

"There's this knee-jerk reaction," Adkins said. "We're quoting prices for projects that won't be awarded for another six or eight months, and no one wants to be hung out to dry."

(Reporting by in Chicago and PJ Huffstutter in Kane County. Additional reporting by in Chicago.; Editing by David Gaffen, and Brian Thevenot)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, April 13 2018. 11:02 IST
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