Racheter: Trade commission action could make life harder for already strained Iowa farmers
Originally published in the Telegraph Herald, 09/12/20: bit.ly/35N6mwr
The year 2020 hasn’t been kind to anyone, but it’s been particularly disastrous for Iowa’s farmers.
In April, Iowa State University released a study estimating that the overall annual damage incited by COVID-19 “will be roughly $788 million for corn, $213 million for soybeans, over $2.5 billion for ethanol production, $347 million from falling ethanol prices, $658 million for fed cattle, $34 million for calves and feeder cattle and $2.1 billion for hogs.” Since the effects of the pandemic have lasted longer than most analysts anticipated, these April projections likely understate the pandemic-induced economic damage that the Hawkeye State’s agricultural sector now faces.
To make matters even worse for Iowa’s farmers, a derecho tore through Iowa last month. Its 140 mph wind gusts wiped out 8.7 million acres of corn and 5.3 million acres of soybean. In total, the storm caused an estimated $3.8 billion in agriculture-related damage, including destroying farmland, grain bins, barns and machinery.
Government officials shouldn’t need a new quantitative analysis to recognize that many Iowa farmers are counting on relief from all levels of government — including the relaxation of unnecessary regulations, fees, and other duties — to weather this crisis. Instead, some tone-deaf federal government bureaucrats are considering increasing their operational costs during this time of great vulnerability.
The International Trade Commission and Department of Commerce are entertaining a request to impose a new tax of between 30 to 71% on imported Moroccan and Russian phosphate fertilizer. It’s unclear why these bureaucrats would even consider this move when producers in all countries — including the U.S. — receive government subsidies. However, what is clear is that the added fees would have significant ramifications for the entire farm community.
These government officials must already know that all farmers need fertilizer to produce our nation’s crop output, but perhaps they do not realize how critical phosphate fertilizer is specifically to farm country.
Recently, Sen. Joni Ernst and a coalition of other senators did an exceptional job of articulating its importance to U.S. farmers. In a letter expressing their opposition to these new duties, they outlined how one-fifth of all fertilizer is phosphorous-based, and that phosphate fertilizer accounts for 15% of American producers’ total cash costs.
Few, if any, U.S. farmers would escape paying this new tax. The U.S. only controls 27% of the phosphate marketplace, By contrast, Morocco is home to 85% of the world’s phosphate reserves. Unless new phosphate reserves miraculously appear in America, its farmers will always remain reliant on these imports, and paying this new import tax would become an inevitability.
Although the federal government has yet to decide if it will impose these new taxes, its mere consideration of the new duties has already increased costs on U.S. farmers tremendously.
In anticipation of an activist response from the federal government, the price of phosphate fertilizer has increased to $320 per short ton, up from $275 before the federal government’s investigation announcement. One analyst said that the market has already baked a vote in favor of the new duties from each agency into its price.
As Iowans rebound from the pandemic and rebuild from the derecho, farmers already have enough threats to their bottom line. The last thing they need is the federal government making things worse. The agencies in question need to recognize the financial strain that their frivolous investigation has already caused and put a stop to it before it causes permanent damage. The health of the agricultural industry is counting on it.
Don Racheter is a retired political scientist and a founder and former president of the Iowa Association of Political Scientists. He serves as secretary of the National Taxpayers Union’s board of directors.