Though the full effects of the COVID-19 response on Washington trade have yet to be determined, a new report by the Washington Council on International Trade (WCIT) offers a hint of what to expect through 2020.
Agricultural industry members say that while exports have decreased, it hasn’t reached the point of dumping milk or plowing over crops as farmers in other parts of the country have done.
“It could happen, (but) we don’t want to think about those kinds of things yet,” Washington Farm Bureau (WFB) CEO John Stuhlmiller said.
Just months before the current economic slowdown occurred, the U.S. had accepted a new trade agreement with Canada and Mexico that replaced NAFTA, while China had agreed to accept more U.S. imports following a series of retaliatory tariffs between the two nations. According to WCIT’s new report, “the advent of Covid-19 has deeply complicated these trade commitments.”
Yet, Stuhlmiller said currently China is honoring its agreement to increase U.S. imports, but “who knows today what they buy tomorrow,” adding that the main problem isn’t so much market access as decreased demand.
WCIT’s report cites projections from the International Monetary Fund (IMF) that all except one of Washington’s top 10 export countries (China) will experience a drop in national economic output, i.e. the total value of goods and services produced. The World Trade Organization (WTO) anticipates global trade to drop between 13-32 percent this year.
“The Covid-19 virus may have lasting impacts on how economies function, consumers spend income, work is done, and supply chains operate,” WCIT President Lori Otto Punke said in a statement. “As the economy slows significantly, we need to make it easier, not harder, for firms to grow abroad.”
The economic downturn in foreign countries translates into lower exports from Washington.. Not only does this hurt hay farmers whose produce is sold almost entirely in foreign markets, but it also disrupts the supply chain flow as it means vessel arrivals at ports are cancelled and there are fewer cargo containers.
“They don’t ship empty containers,” Stuhlmiller said. “The containers have to have something coming from wherever. But when consumer goods are sort of down, there’s no containers to fill.”
At the same time, he said the trade disruption has been a “mixed bag” for the overall industry. Some producers such as wheat farmers currently experiencing lower prices can afford to wait for demand to rise, but farmers with perishable crops don’t have that option.
“If you can hold your product, you hold it, but you don’t hold berries,” he said. “All the fruits and vegetables, you can’t sit on them for 3-4 weeks. Will we be able to ship berries? Yes, to a degree.”
Even with crops such as potatoes that have a longer shelf life, storage space becomes an issue when the existing harvest isn’t sold. The WCIT report notes that “cold storage is limited because the supply of potato products has backed up and filled freezers due to the loss of food service sales. This situation of oversupply will continue for over a year as the new crop of potatoes will enter a market that is still trying to sell the old.”
As a result, Washington farmers recently gave away 200,000 pounds of potatoes at the Tacoma Dome. Their goal is to give away two million pounds of an estimated one billion pounds in surplus potatoes, though most of this crop is sold domestically.
Skagit County farmer Dwayne Faber told Lens that dairy farmers have done the same with their milk rather than dumping it. Faber is a member of Darigold, which recently donated 130,000 gallons of milk to food banks. Although half of the dairy co-op’s products are exported, it’s primarily in the form of milk powder to Mexico, Europe and southeast Asia.
“It’s definitely just a lot of uncertainty and dialing back orders of dairy products from our export partners,” Faber said. Along with reduced demand from those countries, the industry has also suffered setbacks with plans to expand sales in China.
However, he said the most significant hit to dairy sales has been on the domestic market due to the closure of schools and restaurants that buy cheese and milk in bulk.
“That (demand) evaporated overnight,” Faber said.
Stuhlmiller said: “It sucks to be a farmer right now. It’s tough, because of the uncertainty. We don’t know what ‘normal’ is going to be like.”