Trump tariffs strengthen “perfect storm” slamming Nevada farms
Cattle in Elko County. Famartin [CC BY-SA 3.0]
A wall of surplus beef, Donald Trump’s trade wars, and a drop in demand for milk and cheese threaten profits for Nevada’s $1 billion farming and ranching industries.
“Hogs were hit very hard. Pork exports to China got hit the hardest. There’s a hog farm in Las Vegas that’s hurting because they can’t sell their pork to China,” says Doug Busselman, executive vice-president of the Nevada Farm Bureau. “Dairy prices have been challenging for producers all along but tariff wars have made it worse. And hay prices are not going up.”
Hank Combs is the owner of Las Vegas Livestock Farms.
“Any time you lose market share it hurts,” says Combs. “It makes a glut of pigs in the state and lowers prices.”
But the hit to business hasn’t eroded Combs’ support for Trump.
“Sometimes you gotta take the good with the bad,” Combs says. “The economy is doing well. Labor rates are going up so we don’t like that. But I think in the long term we’ll prevail in the trade negotiations and see a rise in commodities.”
Libby Lovig is the manager of Nevada Dairymen, a trade association of dairy farmers mostly based in Northern Nevada.
“We’re stable for now but it’s like a perfect storm,” Lovig says of the tariffs, reduction in demand and accompanying price drops that threaten Nevada’s $170 million dairy industry and the livelihoods of about two dozen farmers throughout the state. The Department of Corrections is also in the dairy business. The Northern Nevada Dairy Farm is adjacent to the Northern Nevada Correctional Facility in Carson City.
Donald Trump’s tariffs on milk exported to Mexico are taking a toll on milk prices, which are already low, given competition from alternative soy and almond milk and the popularity of bottled water, says Lovig.
“Some producers are turning out more cheese in place of fluid milk but it sells for less,” she says.
The nation’s herd of 9 million or so dairy cows decreased by 8,000 between July 2017 and June 2018, according to the U.S. Department of Agriculture (USDA). Decreases in the herd are historically followed by a drop in prices.
Busselman says much of the milk produced in Nevada goes through a Dairy Farmers of America processing plant in Fallon, where it’s turned into powdered milk that fetches a premium on the export market.
“With the trade war going on with China they’ve also been affected there. It’s not competitive for it to be sold so it’s going to other places for other uses instead of the price they were expecting to get shipping to China,” he says.
Despite the trade wars and threats to their own businesses, Busselman says many of the 1,100 ranchers and farmers he represents throughout the state remain strong in their support of Trump, even as the president’s support erodes elsewhere.
“We don’t have the same kind of export markets they do in other states,” Busselman says of Nevada’s 4,200 agricultural operations, which cover almost 6 million acres of land. The average operation earned just over $40,000 in 2012, according to the state.
“In some midwestern areas where you have commodities being more drastically affected, some worry and are frustrated as they get more into harvest season,” Busselman says. “They were already having challenging cash flow situations because of economic conditions and the trade disputes have made that worse. There’s a lot of concern in the Heartland among farmers who have been negatively affected by the trade issues. But we had some concerns over the trade situation with Mexico and Canada before, so Trump is doing what he promised to do.”
While only a few dozen dairy farms dot the Nevada landscape, the greater industry-related threat is to alfalfa, the state’s largest cash crop, which is purchased by dairy farmers in surrounding states such as California.
Farmers there are already being squeezed, not just by 40 percent taxes on $126 million in annual dairy exports to China, but also by cuts in demand from Mexico.
California dairies were folding even before Trump’s tariffs went into effect, declining from 1,563 in 2012 to 1,392 in 2016, according to the California Department of Food and Agriculture.
Meanwhile, a 2.5 billion pound surplus of beef and poultry in deep freeze throughout the nation is cause for concern to Nevada cattle ranchers, whose herds roam rangelands largely owned by the federal government.
The so-called “Wall of Beef” is the result of trade disputes and a supply glut, government experts say. Canada hit U.S. beef imports with a ten percent tariff on July 1, and China followed with a whopping 25 percent tax on imported beef on July 6.
Additionally, U.S. consumption is down. The National Resources Defense Council says Americans cut their beef consumption by nearly one-fifth between 2005 and 2014, with consumption of chicken and pork falling off, as well.
Nevada’s cattle industry boasts about 460,000 head — mostly breeding cattle and calves — and employs about 1,400 people, according to the state’s Cattle Association.
While the U.S. is the world’s largest producer of beef, Nevada’s contribution is minor — ranking 37th out of the 50 states, according to the National Agricultural Statistics Service.
The state is primarily a “nursery” for “feeder calves”, which are born in the spring, sold in autumn and transferred to feeder lots out of state where they are “finished” or fattened up for slaughter, says Busselman of the Farm Bureau.
“We don’t produce a lot of straight beefs. The cows you see in the pastures, they are having the cattle that will someday become beef,” he says.
“The world is developing a taste and liking for American beef,” says Nevada Cattlemen’s Association president Sam Mori of Tuscarora. “Per capita consumption is static. Supply is outrunning demand right now but the export market is increasing.”
Mori thinks the trade wars will have a “minimal, short-term effect.”
“The majority of the protein surplus is pork, not beef,” he says.
Nevada’s public lands are managed by the Bureau of Land Management and the U.S. Forest Service, both of which issue grazing permits. The fee for livestock grazing is $1.41 per animal unit month (AUM). An animal unit month describes the grazing capacity of a given pasture. A 1,200 pound cow and her 300 pound calf would be considered 1.5 AU. Additionally, 780 pounds of grass is considered one AUM, meaning a 1,000 pound animal would consume 780 pounds of forage in one month.
The government also assesses a surcharge for the grazing of livestock not owned by the person who holds the permit. Nevada’s surcharge is $2.97 per AUM, the second lowest of the eleven western states. Arizona has the lowest surcharge at $2.83. Nebraska has the highest at $13.44, according to the BLM.
Cattle ranching, for all its history and romanticism, is water-intensive, debilitating to the environment and not as profitable as other land uses such as hay and alfalfa farming.
“Land that grows alfalfa hay that’s baled and sold as a commodity has a higher return than land that is grazed,” says Busselman.
Alfalfa sells at about $180 a ton, he says. Under normal production conditions, an acre will yield four and a half tons a year.
USDA lists the state’s production value of hay at $174 a ton or $195,440,000 annually, and the value of alfalfa hay at $176 a ton, or $146,160,000 for 2017.
Nevada’s best-known alfalfa farmer is U.S. Senator Dean Heller, who owns a 180-acre farm in Smith Valley.
Last week, while the rest of the nation was tuned in to Supreme Court nominee Brett Kavanaugh’s hearing before the Senate Judiciary Committee, Busselman and his fellow farm experts were watching lawmakers wrangle over the Farm Bill, which could open a new crop for Nevada farmers.
“There’s quite a bit of interest in growing industrial hemp. It could come off Schedule I. We were involved in the last legislative session for further expansion of the development,” Busselman says. “It’s probably going to be a niche market. Since the 2004 farm bill, it’s been eligible for research activities so there’s been a growing interest of identifying what it takes to grow it, seed varieties, production practices.”
In the meantime, Busselman is keeping one eye on trade talks, especially the North American Fair Trade Agreement among the U.S., Canada and Mexico.
“As we go forward there’s a Mexico agreement that has been worked out. There’s some expectation the Canada thing will be worked out and both Canada and Mexico are significantly larger markets for the U.S. than China.”
As for Busselman’s other eye — it’s on alfalfa prices, fluid milk, and the hog glut.
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