Wheat Farmers Face Uncertainty Amid Trade Talks With Japan

May 1, 2019

Farming is always a gamble in Montana, but this year a new tariff on wheat and an undefined trade deal with Japan means more uncertainty for farmers as they plant this spring. President Trump discussed agricultural trade negotiations last week with the prime minister of Japan — Montana’s largest importer of wheat. The talk comes two years after Trump pulled the U.S. out of the Trans-Pacific Partnership.

Just south of Manhattan, Matt Flikkema drives his silver pickup toward a horizon rimmed by the the snow-capped Spanish Peaks. He points to the wide-open fields on his left and right.

“So that’s the end of this barley field, and here this is winter wheat, it was planted in September, early October last year. You can see it just starting to green up," says Flikkema. "See the rows there?”

Flikkema grows a rotation of wheat and barley on his farm, and today he’s helping his neighbor. Since it rained the night before, Flikkema is checking the field to see if it’s dry enough to plant. He pulls out his cell phone.

“Yeah, John, it looks way drier up here. I think we can be running …”

Fields like these make Montana the fourth largest wheat producer in the U.S. About 80 percent of the state’s wheat is exported — mostly to Japan and other Pacific Rim countries. But without the Trans-Pacific Partnership or TPP, new tariffs that went into effect last month have made U.S. wheat more expensive to import than wheat from Canada and Australia.

Lola Raska is the executive vice president of the Montana Grain Growers Association. She says Japan has indicated they’ll reduce their purchases of U.S. wheat as early as this summer.

“Some of our analysts have estimated that those losses to Montana could be $150 million annually. So these talks that are going on now with Japan are really important to Montana producers,” says Raska.

Raska says grain growers have already seen depressed prices for the last year and a half. The Grain Growers Association is starting to look more at markets in South America and China.

As a former board member of the Montana Grain Growers Association, Flikkema says he knows how much time and money goes into making a trade deal.

“It’s just terribly, terribly frustrating to me that they can just toss that out after all the years and the money the growers have stuck into education efforts as well as the foreign market development funds that come from the government — just tossed it all away,” says Flikkema.

When asked if this has affected what he and his neighbors are planting this year, Flikkema says, “There’s such a small possibility of what we can raise here — wheat and barley on dryland. In southwest Montana there’s just not a whole lot of options.”

A lack of options means more farmers are seeking government support, but it’s not just wheat producers. Recent trade disputes have hurt prices for chickpeas and lentils, barley and beef.  Around 6,500 Montana agricultural producers signed up for tariff relief from the federal government earlier this year, receiving $14 million to augment their farm income.

Anton Bekkerman is an associate professor with the Department of Agricultural Economics and Economics at Montana State University in Bozeman. He says the U.S. agriculture sector is often vulnerable during tariff retaliations.

“Because other countries are going to do is say, ‘Well you put a tariff on steel or aluminum so we’re going to put a tariff on soybeans or wheat or barley,’” says Bekkerman.

He adds trade disputes create uncertainty for producers and importers.

“Folks who buy U.S. goods don’t want to say, ‘Well, look, today I think I can get one price, but if something happens in the White House they decide to impose a new tariff and then my country retaliates, tomorrow I might have a very different price, which may not be as good for my business,’” Bekkerman says.

He says this causes buyers of imported goods to look for other, more stable markets — even if they are more expensive.

“So once you lose a partner, it’s very difficult to get that partner back because that infrastructure and those contracts to buy and sell goods have already been established," says Bekkerman.

Democratic Senator Jon Tester after the Bozeman Town Hall last month said Montana is an export state and depends on trade deals.

“In Japan’s case it’s been generations setting that market up, and it looks like we’re on the cusp of losing it," said Senator Tester. So these trade agreements are really important. They gotta be good trade agreements. They gotta be fair. But they can’t be no trade agreement because that just doesn’t work for our trade economy.”

President Trump says his administration will try to negotiate a deal with Japan by late May when he visits Tokyo.