By Joyce Yu
Philadelphia, PA–It’s a double whammy for American farmers with rising fuel prices and Sino-U.S. trade dispute remaining unresolved. Farmers from agriculture states Iowa and Arkansas told Reuters that higher fuel prices have driven up their cost which represents “a fairly significant amount of income to lose”, and they “feel the pain right away”.
Diesel fuel is essential to agriculture in the U.S., from planting, to harvesting, and to shipping crops to market. Official data from the U.S. Department of Agriculture data showed farmers will spend an estimated $15.25 billion in 2018 on fuels, an 8% increase 2017. The situation is exacerbated as US crude futures hit their highest levels since late 2014, mostly due to concerns about Iranian supplies after the U.S. withdrew from the Iran nuclear deal. This comes at a time when the U.S. and China, the world’s two biggest economies, have been locked in a trade dispute for months.
The second round of trade talks between the two countries which began yesterday has unfortunately made little progress so far. Thursday, several news agencies quoted anonymous sources that China would offer the U.S. a $200 billion trade surplus cut. Those reports, however, were quickly denied by a Chinese ministry spokesman on Friday. “This rumor is not true. This I can confirm to you,” the spokesman said. “As I understand, the relevant consultations are ongoing and they are constructive.”
What’s even more disappointing to the market is President Trump’s comment. He told reporters during a meeting with NATO Secretary Jens Stoltenberg he doubts trade negotiations with China will end successfully.
“All of the news we’re getting on trade is incremental, unfortunately,” said Art Hogan, chief market strategist at B. Riley FBR. “Unless you’re in the room, it’s hard to get a feel for how these negotiations are going.”
Farmers are already feeling the pinch with depressed crop prices. Rising fuel cost and ongoing trade dispute will further erode agricultural income. “We’re seeing financial stress occurring in agriculture that we probably haven’t seen for a decade or so,” Scott Brown, director of strategic partnerships at the University of Missouri’s College of Agriculture, Food and Natural Resources, told the Reuters.
Net farm income, which has already fallen to level that is half of that in 2013, is forecast to decline to $59.5 billion in 2018, 8.3% lower from 2017, according to the USDA.
