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Farms

Two combines sit in a field along Towanda Barnes Road in north Normal in this October file photo.

On the farms of Central Illinois, this year's record-yielding harvests have come with a large amount of uncertainty.

Many farmers, expressing longstanding frustration with trade partners like China, welcome President Donald Trump's tougher stance on trade. But they face uncertainty that has set in as retaliatory tariffs from China, Canada, Mexico, the European Union and other key trade partners began to take effect, harming perhaps no one more than the state's farmers. They hope the squabbles will be resolved soon, given their increased reliance on the international market.

There have been signs of breakthroughs: a renegotiation of the North American Free Trade Agreement and perhaps a thawing of tensions with China, which has begun to buy U.S. soybeans once again.

"Now, unfortunately, we find out very quickly how reliant we've become on being able to move our products internationally," said Mark Gebhards, executive director of governmental affairs and commodities for Illinois Farm Bureau. "And it was a heck of a hit for us this past year. We hope we're headed in the right direction with some of these purchases."

In 2017, the most recent year data was available, agriculture accounted for more than $8 billion of Illinois' more than $65 billion worth of exported products.

China accounted for 25 percent of the state's agricultural exports, including $1.75 billion in soybeans and more than $500 million in corn.

During the fall 2018 harvest, central Illinois farmers had record crop yields of both, producing the most soybeans of any state in the country while ranking second in corn production. But with China not buying, many farmers had to store excess crops for the winter, hoping the tariff situation gets resolved.

"You see more and more of that," Gebhards said. "That's an example of our farmers saying, 'OK, I'm going to try and hold on to this product as long as I can to get a better price' and, again, hoping that this foreign market comes back for them and leads to a higher price."

Gebhards said that since farmers are "price takers, not price setters," they have to rely on what the market gives them.

Garry Niemeyer, who grows corn and soybeans on his farm just outside of Auburn, said total harm was prevented by $4.7 billion worth of onetime aid the U.S. government gave farmers affected by tariffs, but hoped for a long-term solution that gave farmers access again to international markets.

"So, normally, China would buy our soybeans from harvest until about Feb. 1," Niemeyer said. "Well, they haven't bought anything until the last couple of weeks. So it was kind of like we didn't have a tariff issue for farmers (because of the aid). It's a one-year, one-time deal. So hopefully, we get this tariff thing resolved."

Niemeyer, who previously served as president of the National Corn Growers Association, gave Trump credit for forcing a conversation with countries like China in a way that previous presidents had not. However, he said access to the export market is crucial for the long-term success of farmers.

"Our problem is that less than 5 percent of the world's population lives in the United States," Niemeyer said. "We've gone with ethanol, but that market's about saturated. We've about run the gamut on livestock. So for us to be competitive from here on out, we need to do it with exports."

According to experts, international trade has been a largely positive development for Illinois farmers and businesses, exposing them to a larger pool of potential customers and giving them access to an international supply chain.

The state has several strategic advantages, according to experts. Among them: a central location in the United States, a global city in Chicago, a major international airport, direct access to key markets through the Mississippi River and the Port of Chicago, seven Class I rail lines and several interstate highways.

And, of course, the state's ability to plant more and better-quality crops than many parts of the world makes the export market especially attractive.

"The best place to grow crops in the world is right here in Central Illinois," Niemeyer said. "This is the most fertile farmland in the world. And only 10 percent of the world's surface or less is producing good crops."

As a result of these advantages, Illinois is the largest exporting state in the Midwest and the fifth-largest exporting state in the United States.

"Ninety-five percent of the world's customers live outside the United States," said Mark Denzler, president of the Illinois Manufacturers' Association. "So if we're not selling to the European Union or if we're not selling to Mexico or Canada, other countries are trying to do so. And these trade agreements provide the ground rules."

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Such agreements, which allow for the free flow of products from one country to the other, have allowed for the more efficient production of manufactured goods.

"The supply chains now are totally in connection," said Animesh Ghoshal, a professor of economics at DePaul University.

One example Ghoshal offered was something as simple as a seat belt, which starts with the manufacturing of the fiber in the United States; then it is sent to Mexico to be cut and woven, where the labor-intensive process can be done where labor is cheaper; then it is sent to Canada for washing and cleaning since the country has an abundant supply of water.

Illinois also has benefited from changes in steel trade policy. In June, Trump came to Granite City, the blue-collar, steelmaking company town that hugs the Mississippi River just north of St. Louis, to visit the U.S. Steel Granite City Works plant.

Following the enactment of a 25 percent tariff on imported steel and aluminum in March, U.S. Steel had announced that was bringing 500 steel jobs back to the Granite City plant, where steel production had ceased for more than two years.

And, just days before Trump's speech, the company announced plans to bring back an additional 300 jobs and restart a second blast furnace in the fall.

"After years of shutdowns and cutbacks, today the blast furnace here in Granite City is blazing bright, workers are back on the job and we are once again pouring new American steel into the spine of our country," the president boomed to the steelworkers gathered in the room.

Trump received a hero's welcome, with many giddy to hear from the man they believe saved their industry with his trade policy, which slapped tariffs on imported goods from friends and foes alike.

However, Illinois' strategic advantages export market also has exposed state farmers and businesses more so than others as the United States works through its trade issues with friends and foes alike. According to the U.S. Chamber of Commerce, $6.7 billion of Illinois exports are threatened by the emerging trade war.

"All inclusive, Illinois agriculture is a key player not only for the state's economy, but for the country as well," Gebhards, said. "If you shift that over to the trade side, it's imperative that we have markets to export on our product. We rely more and more on the export market each year."

Statistics from the Illinois Farm Bureau indicate that Illinois farmers export 40 percent of their corn, 34 percent of their pork and 6 percent of their soybeans to NAFTA countries. And taking into account all products, Canada and Mexico are Illinois' top export markets. Gebhards said this makes the ratification of the United States -- Mexico -- Canada Agreement, which would replace NAFTA, a high priority.

USMCA is fairly similar to NAFTA, with two major differences being that automobiles must have 75 percent of their components be manufactured in the U.S., Canada or Mexico in order to be exempt from tariffs, up from 62.5 percent; and that instead of being an open agreement, the deal is subject to review every six years, with any of the three having the ability to pull out with 10 years' notice.

Ghoshal said that, while fairly similar to NAFTA, the new deal adds a level of uncertainty that might make companies think twice about investing in a different country.

"You're not going to put a plant in a country if you are not sure that 16 years from now, the treaty will still be there," Ghoshal said. "In which case, it might not be of any value."

Additionally, Gebhards said it's important that lingering issues with China get resolved and that a bilateral trade agreement with Japan gets made.

The farm bureau, he said, also is looking to establish better relations with other countries around the world as a way of opening new markets for farmers, a diversification that would theoretically lessen the exposure of farmers over-reliant on trade partners like China buying their crops.

Still, Gebhards welcomes signs indicating a thawing in the U.S.-Chinese trade war.

"That's certainly a step in the right direction," he said. "That doesn't get us back necessarily to where we were, but it's certainly a positive step that we can hopefully open these markets back up with China."

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