US suppliers stock up on Chinese chemicals to prepare for tariff rise

Source: Xinhua | 2018-11-30

US agriculture suppliers are stockpiling the Chinese chemicals that farmers need to kill crop pests and boost yields before tariffs on them could more than double on January 1.

The additional tariffs, threatened by US President Donald Trump, are part of an eight-month trade dispute between the United States and China affecting US$250 billion worth of Chinese products and US$113 billion in US goods.

The duties could disrupt supply lines for US companies that sell chemicals and fertilizers, part of the US$28-billion farm chemical industry.

The sector relies on Chinese imports for 40 percent of the ingredients and materials needed to make crop chemicals, according to consultancy Informa.

Nutrien — the biggest US retailer of farm supplies — is stockpiling enough chemicals to last into the busy 2019 planting season.

Other distributors are doing the same, said Daren Coppock, CEO of the Agricultural Retailers Association.

Higher tariffs on farm chemicals would deal another blow to an agricultural industry that has already seen prices for staple crops plummet because of the trade row between the world’s two largest economies.

China has imposed import taxes on US crops including soybeans — effectively shutting off an export worth US$12 billion in 2017.

The Trump administration imposed 10 percent tariffs starting September 24 on about 5,700 Chinese exports, ranging from pork to bicycle tires. The duties are scheduled to rise to 25 percent on January 1, and the potential economic damage adds urgency to a meeting expected between Trump and Chinese President Xi Jinping during the G20 summit in Argentina that starts today.

Trump has lately sounded more hopeful of resolving divisions with China, saying that higher tariffs may not be needed.

The prospect of higher pesticide costs on top of weak crop prices is “worrisome,” said Joe Ericson, president of the North Dakota Soybean Growers Association.

The state’s farmers depend on China to buy soybeans, but the they have piled up in elevators — storage facilities that buy from farmers — as the world’s biggest buyer has instead turned to countries such as Brazil.

US chemical-maker Willowood has little choice but to pass higher costs of buying Chinese chemicals on to retailers who sell to farmers.

“There’s not enough margin to eat that difference,” said Joe Middione, Willowood’s strategic business manager. “We’re seeing fairly significant increases across the portfolio.”

December is a brisk sales period, when farmers stock up before a new tax year.

“It’s caused a lot of confusion,” Middione said. “Farmers, are shell-shocked.”