NEWS
SUPPLY
Rising steel prices and what they mean
for agricultural producers
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By Austin Travis
f there is one constant in the agriculture industry, it’s that
nothing ever stays the same. Between fluctuating market prices,
drought, pestilence, hurricanes and Washington’s politics, there
is always something. It appears that the current obstacle is rising
steel prices because of the recently implemented steel and alumi-
num tariffs.
The U.S. has placed various tariffs on many of our trade partners
for years. But because of NAFTA and the U.S. relationship with the
EU, historically members have been exempted or placed under less
stringent requirements. However, this second round of tariffs, as
Parkin and Hodari of The Wall Street Journal reported means, “…
the U.S. would impose duties of 25% on steel and 10% on alumi-
num from Canada, Mexico and the European Union starting Friday
[June 1].” The EU and U.S. neighbors were both given temporary
exemptions, but as trade talks broke down the waivers were rescind-
ed. As ABC News reported, quoting Commerce Secretary Wilbur
Ross, “the previous extension for Canada and Mexico was spe cifi-
cally due to ongoing NAFTA talks, but ‘those talks had been taking
longer than we had hoped’ and there’s no longer a precise date of
when a deal may be reached.”
Unfortunately, according to Robin Bhar of the French bank
Société Générale, “The countries targeted accounted for around
40% of U.S. steel imports in 2017, [with] Canada supplying 16%, the
EU 15% and Mexico 9%.” As raw products are taking the hardest hit
by these new tariffs, our domestic producers will be hit the hardest.
But it extends past imported steel. Since January 1, steel prices have
seen a 20 percent to 40 percent increase. This has caused domestic
steel demand to skyrocket, but supply has changed very little as a
result of our steel mills not being able to keep up. There has been
some growth in domestic steel mills lately as a result of closed mills
reopening their doors because of the increased demand. Unfortu-
nately, it still is not enough to keep up with the needs. In short, both
foreign and domestic steel are now much more expensive than they
were this time last year.
You may be wondering how all of this will impact you as an ag-
ricultural producer. The short answer — prices will continue to rise.
Wire rod, zinc and many other raw materials are in very short sup-
ply. Pearson products — t-posts, gates, panels, wire, disc and sickle
blades, sweeps, bearings, etc. — are experiencing price increases. In
essence, if it’s made of steel or aluminum, the price will be going up
as new inventory arrives.
The price increase will most likely continue until the markets
are able to correct themselves or until producers begin importing
finished products that are not impacted to the same extent by the
tariffs. Jefferies LLC, an investment firm headquartered in New
York said it “expected domestic producers to raise prices, but that
could in turn eventually make it economical to start importing
again.” On the other hand, it is very possible that these increases
could last. There is no definitive end in sight, and any reports to the
contrary are just speculation.
United Ag is doing everything possible to work with suppliers
to stay ahead of price increases resulting from the steel and alu-
minum tariffs. In a time when margins are tighter than ever and
input cost savings are crucial, we understand the need to mini-
mize potential damage to the bottom line. We are doing our best
to reduce the negative effect on retail prices. Although we cannot
predict the future or prevent the undesirable effects of legislation,
we can work closely with our providers and ensure that we are
operating as liaisons between manufacturers and our producers
to determine the best course of action we can take to most benefit
our members and patrons.
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