KANE COUNTY, Illinois, Apr 13 (Reuters): Lucas Strom, who runs a century-old family farm in rural Illinois, cancelled an order to buy a new $71,000 grain storage bin last month - after the seller raised the price five per cent in a day.
The reason: steel prices jumped right after US President Donald Trump announced tariffs.
Throughout US farm country, where Trump has enjoyed strong support, tariffs on steel and aluminum imports are boosting costs for equipment and infrastructure and causing some farmers and agricultural firms to scrap purchases and expansion plans, according to Reuters' interviews with farmers, manufacturers, construction firms and food shippers.
The impact of rising steel prices on agriculture illustrates the unintended and unpredictable consequences of aggressive protectionism in a global economy. And the blow comes as farmers fear a more direct hit from retaliatory tariffs threatened by China on crops such as sorghum and soybeans, the most valuable U.S. agricultural export.
A&P Grain Systems in Maple Park, Illinois - the seller of the storage bin Strom wanted to buy with a neighbouring farmer - raised its price two days after Trump announced aluminum and steel tariffs on March 1 to protect US producers of the metals. Strom and his neighbour backed out.
"Would that price destroy us? No," Strom said. "But these days, you have to be smart about your expenses."
The metals tariffs also hitting makers and sellers of farm equipment, from smaller firms like A&P Grain to global giants such as Deere & Co and Caterpillar Inc. Such firms are struggling with whether and how to pass along their higher raw materials costs to farmers who are already reeling from low commodity prices amid a global grains glut.
The world's two largest economies have threatened each other with tariffs on tens of billions of dollars of goods recent weeks.
Trump imposed tariffs of 25 per cent on steel and 10 per cent on aluminum in a move mainly aimed at curbing imports from China. He has since temporarily excluded the European Union and six other allies from the duties and given them until May 1 to negotiate permanent exemptions.
A&P Grain President Dave Altepeter said the steel used in their bins is made in the United States, but domestic steel prices also have soared because of the tariffs.
US steel mills typically adjust their prices once a year, normally in the first quarter, Altepeter said. But this year, those prices have jumped four times, he said.
The price of steel used in A&P's grain bins has jumped about 20 per cent since January 1.
"Any time there's any type of negative talk that affects the steel mill, they've raised the price," said Altepeter.
Last year, about 95,000 tons of steel was shipped to the agriculture industry, compared to the 14 million tons for the US auto industry, according to the American Iron and Steel Institute, an industry group.
Other factors had been driving up steel prices before the recent trade disputes, including an improving global economy and accelerating manufacturing and construction, particularly in the US.
The White House referred questions from Reuters to the US Department of Agriculture, which did not respond to a request for comment. Trump and Agriculture Secretary Sonny Perdue have vowed the US government will protect farmers from China's tariffs, but not explained how.
US farmers can ill-afford any loss of sales. Farm income has dropped by more than half since 2013, following years of massive harvests that have depressed prices for staples such as corn and soybeans.
US competitors Brazil, Argentina and Russia have all raised grain output in recent years, eating into the US share of global markets. Mexico imported ten times more corn from Brazil last year and is set to buy even more in 2018 on worries that renegotiations of the NAFTA trade pact could disrupt their US supplies.
Strom said he has also pushed back plans to build a new metal storage building to house his planter and the combine head he uses for harvesting corn and soybeans. Other farmers, food producers and beer makers have scrambled to finalise deals for steel-based equipment before prices climb more.
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