By Gary Brock
XENIA — More than any other occupation, the business of being a farmer means almost anything can and will happen at some point in the future. Being a farmer also means predicting that future is almost impossible.
Trying to forecast the business of farming in 2017 is going to be especially difficult.
There will be many “unknowns” for farmers in this coming year, and these are more than the usual concerns about rain and temperatures. These unknowns ahead are making for some very nervous farmers at we begin a new year.
Politics and China
Consider this: In 2015, American farmers exported to the People’s Republic of China about 1.3 billion bushels of soybeans. That is more than 1 in 4 bushels produced in America that year. When the numbers are in, 2016 is expected to be even higher in soybean exports. In addition to states like Iowa, a large portion of these exported soybeans come from here in Ohio.
Included in the exports are also millions of bushels of non-GMO soybeans exported to Japan by processors like Dave Martin and his Bluegrass Farms in Fayette County. He has developed a great relationship with Japanese companies hungry for all the non-GMO soybeans he can send them for their soy products.
That said, grain farmers are more than a little worried as Donald Trump prepares to take office as the 45th president of the United States Jan. 20.
Threats of tariffs and negative comments about China were part of Trump’s campaign, as well as his opposition to the now defunct Trans-Pacific Trade Partnership agreement (Clinton wasn’t too keen on it either). China, of course, wasn’t part of that trade deal.
Companies in China just deal directly with American grain dealers and groups like the U.S. Soybean Export Council. I saw this strong relationship firsthand in April when I visited a large fish farm near Shanghai that was using millions of pounds of American soybeans in their fish feed.
Would tough talk against China by a President Trump hurt this relationship? On average, with soybeans about $10 a bushel, Chinese companies (which essentially means their government) added about $10 billion dollars to the U.S. economy in 2015 and likely more in 2016. Do we, Mr. Trump, really want to jeopardize that income coming to American farmers?
The Chinese prefer the quality of American soybeans to any other country. But don’t for a second think that trumps politics. The Chinese would cut off the purchases in a second and just get what they can from South America (as crappy as their soybeans might be) and if worse comes to worse, they’ll just feed their fish — and their people — something else.
We don’t like their totalitarian government, but we should like their Yuan. Money is money, which is something President-elect Trump ought to understand. American and Ohio farmers are hoping he does, at least.
Rolling the seed dice
Another reason farmers are nervous about the future of grain and China is the fact that in all likelihood, there is going to be a lot more of it to sell next year.
If I heard it once last fall, I heard it 30 times that grain farmers were planning this year to shift planting to more soybeans and less corn. And in order to get the best prices, many have already made these seed purchases shirting to more soybeans.
It’s simply a matter of dollars and cents and sense.
In 2016, corn prices at under $3.50 a bushel were not high enough for most farmers to make a profit, or even break even. Soybean prices of about $10 a bushel garnered much better margins. So many farmers here in Ohio decided to shift their ratio of corn and soybeans more in favor of soybeans.
There’s good reason for the thinking, as long as prices stay at $10 or so and there will be buyers for all the bushels. That is another reason for nervous farmers with the new administration heading to Washington D.C.
Taxes and Pressure
When the Ohio legislature failed to approve CAUV property tax reform in December, Ohio farmers were more than a little disappointed. What it meant was that any actions the Ohio Legislature does take this year won’t be effective until 2018.
Both the Ohio Farm Bureau and the Ohio Farmers Union pushed hard for passage of SB-246 and its companion legislation, HB-398, which would have moderated increases in property taxed by excluding certain non-agricultural factors. The legislation would have also corrected a problem with land involved in conservation practices, such as land used for a conservation practice or enrolled in a federal land retirement or conservation program for at least three years. It would then be valued at the lowest of the values assigned on the basis of soil type.
Neither bill passed the committee stage in the General Assembly.
Currently, CAUV (Current Agricultural Use Valuation) tax rates assume that property is being used for crop production. The proposed legislation would have allowed these acres to be valued at a lower minimum value.
Why weren’t these bills approved? Political push back.
The Ohio School Board Association and two other school administration groups wrote the legislature in opposition to the bills, claiming passage might increase residential property taxes and reduce property tax revenues to rural school district.
I’d suggest the second half of that is probably true. Which is why school groups would oppose CAUV tax relief for farmers. After all, farmers are paying a pretty hefty price tag for the land they own.
The fact is, farmers are being taxed on what their land used to be worth, not what it is worth now. In Ohio, counties are reappraised every six years. These reappraisals stagger the 88 counties over the six-year period. In the last six years, farm land value has dropped from record highs just a decade ago. So the actual value of the land today, and the appraised value can be two very different things.
Beginning in 2017, 28 Ohio counties are up for their reappraisals, most of them rural counties. It is likely that after the reappraisals are done, the farm land values will go down. That is the hope for farmers in 2017. But they are also concerned about what impact these lower values, and thus lower taxes, will have on local school districts. Will there be a push to counteract this tax relief with another form of taxation?
That’s just one more thing farmers have to consider as we head into 2017.
Gary Brock can be reached at 937-556-5759 or on Twitter at GBrock4.