TED: THE UNITED STATES AND CHINA ARE TARGETING EACH OTHER FOR BILLIONS OF DOLLARS WORTH OF TARIFFS. AN ESCALATING TRADE CONFLICT COULD BECOME A FULL-BLOWN TRADE WAR. WITH ARIZONA FARMERS AMONG THE CASUALTIES. HERE WITH MORE IS STEFANIE SMALLHOUSE, PRESIDENT OF THE ARIZONA FARM BUREAU. WELCOME TO "ARIZONA HORIZON."
STEFANIE SMALLHOUSE: THANK YOU VERY MUCH. NICE TO BE HERE.
TED SIMONS: HOW BIG IS THE AGRICULTURE SECTOR IN ARIZONA?
STEFANIE SMALLHOUSE: WE HAD A NEW STUDY 2017. THE AG INDUSTRY IN ARIZONA ACCOUNTS FOR $23.3 BILLION OF OUR STATE ECONOMY. FAIRLY SIGNIFICANT AND IMPORTANT.
TED SIMONS: BIG AROUND THE COUNTRY? CONCERNED TO OTHER STATES?
STEFANIE SMALLHOUSE: IN TERMS OF NATIONWIDE, ARIZONA AGRICULTURE IS IMPORTANT FOR ITS DIVERSITY. WE DO NOT HAVE A LARGE FOOTPRINT, BUT WE ARE DIVERSE.
TED SIMONS: HOW EXPERT ORIENTED IS ARIZONA AGRICULTURE?
STEFANIE SMALLHOUSE: I WOULD SAY VERY ORIENTED. EVERY STATE IN THE UNITED STATES IS. FOREIGN EXPORT MARKETS ARE IMPORTANT TO AGRICULTURE. ALMOST 25% OF WHAT WE PRODUCE HERE, WE SEND ABROAD.
TED SIMONS: WHEN WE SEND ABROAD, WHERE DO WE GO?
STEFANIE SMALLHOUSE: CHINA IS OUR SECOND LARGEST EXPORT MARKET. IT IS FRUSTRATING FOR RANCHERS IN ARIZONA AND EVERYWHERE.
TED SIMONS: I WANT TO GET TO THAT FRUSTRATION IN A SECOND. AS FAR AS PRODUCTS, WHAT DO WE SEND OUT?
STEFANIE SMALLHOUSE: ACCORDING TO THE POTENTIAL TARIFFS MIGHT BE, WE WILL BE IMPACTED IN CITRUS, TREE NUTS, HOGS, BEEF COTTON, AFL FA, DATES LIMES.
TED SIMONS: I HEARD COTTON WAS ESPECIALLY BIG WITH CHINA.
STEFANIE SMALLHOUSE: WE EXPERT 70% OF OUR DOMESTIC PROTECTION OF COTTON. ARIZONA, 20% GOES TO CHINA. IT IS SIGNIFICANT.
TED SIMONS: THAT BRINGS US TO THE QUESTION OF WHAT HAPPENS IF A TRADE WAR BREAKS OUT. IF IT DOES NOT GO TO CHINA, DOES IT HAVE OTHER PLACES TO GO?
STEFANIE SMALLHOUSE: THAT IS WHAT EVERYONE IS WORRIED ABOUT! CHINA IS SUCH A HUGE CONSUMER ON THE STAGE, IT WILL BE DIFFICULT TO FIND AN ALTERNATIVE MARKET. OUR FRIENDS IN BRAZIL AND ARGENTINA AND OTHER COUNTRIES WHO ARE BIG PRODUCERS OF BEEF AND COTTON AND SOYBEAN AND THINGS LIKE THAT, I DO NOT THINK THEY WILL WAIT FOR US TO GAIN THE MARKET BACK. THEY WILL JUMP RIGHT IN THERE. SO THAT'S CONCERNING.
TED SIMONS: THE IMPACT ON ARIZONA, IMPACT ON THE INDUSTRY, IMPACT ON US CONSUMERS?
STEFANIE SMALLHOUSE: EXACTLY. THE SHORT-TERM, WE HAVE LOWER PRICES BECAUSE WE HAVE A SURPLUS OF SOME ITEMS, BUT IN THE LONG-TERM, IT'S DAMAGE THAT CAN'T BE FIXED BECAUSE OF FARMERS GOING OUT OF BUSINESS AND CONSOLIDATION AND THEN PRICES WILL GO UP AGAIN. SHORT TERM, PRICES GO DOWN, BUT LONG-TERM, IT IS BAD.
TED SIMONS: WHAT ABOUT JOBS? TRANSPORTATION? PICKING THE FRUIT? WHAT ARE WE TALKING HERE?
STEFANIE SMALLHOUSE: 50,000 PLUS JOBS. EVERYONE WORKING IN THE PACKING PLANTS, FOOD-PROCESSING COMPANIES IN ARIZONA WILL BE IMPACTED.
TED SIMONS: TRANSPORTATION, RETAIL, FINANCE HAS TO BE INVOLVED AS WELL, CORRECT.
STEFANIE SMALLHOUSE: RIGHT NOW, THOUGH THERE IS NOT TECHNICALLY A TRADE WAR, THE PRESIDENT HAS NOT SIGNED THE PAPER; FARMERS ARE SEEING A DROP IN COMMODITY PRICES. BANKS QUESTION IF THEY WILL LOAN MONEY.
TED SIMONS: AS THEY SEE THE PRICES DROP, IS THE AGRICULTURE INDUSTRY IN ARIZONA, FARMERS IN GENERAL, ARE THEY IN GOOD SHAPE? YOU HEAR ABOUT PEOPLE IN THE MIDWEST ALL THE TIME LOSING THEIR FARMS, PROPERTY, WHAT IS GOING ON IN ARIZONA?
STEFANIE SMALLHOUSE: WE ARE SO DIVERSE, LIKE OUR RANCH, WE ARE DIVERSE TO SELL TO MAKE UP FOR THE UPS AND DOWNS. WHETHER IT IS BEEF OR HAY. ARIZONA IS VERY DIVERSE. IF YOU ARE GOING COTTON, THAT'S AN INTENSE CROP TO GROW IN TERMS OF INPUT AND INVESTMENT. YOU CANNOT JUST SWITCH TO SOMETHING ELSE. IT HAS AN IMPACT ON THE GROWERS. IN ADDITION, POSSIBLY BEEF.
TED SIMONS: DOES THE UNCERTAINTY HAVE AN IMPACT ITSELF?
STEFANIE SMALLHOUSE: THAT IS WHAT WE ARE SEEING. WHEN BANKS HESITATE TO GIVE YOU LOANS, THAT'S UNCERTAINTY. FARMERS MAKE INVESTMENTS IN THEIR RURAL COMMUNITIES. YOU DO NOT KNOW WHAT WILL HAPPEN WITH THE TARIFF. IF THE COMMODITY DROPPED, AM I GOING TO BUY THE NEW TRACTOR OR SEED? IT IS CREATED UNCERTAINTY THOUGH IT HAS NOT HAPPENED YET.
TED SIMONS: SOMETHING ELSE THAT HASN'T HAPPENED YET IS NAFTA. YOU ARE FACING THAT AS WELL.
STEFANIE SMALLHOUSE: I WOULD SAY THAT AGICULTURE IT IS LIKE A JENGA GAME. WE HAVE THE NAFTA PIECE PULLED OUT SLIGHTLY. WE ARE LOOKING AT POTENTIAL TARIFFS. IT IS MAKING THINGS A LITTLE UNSTABLE, BUT WE ARE A STRONG INDUSTRY.
TED SIMONS: THE TPP IS THAT A BIG DEAL FOR FARMERS?
STEFANIE SMALLHOUSE: IT WOULD HAVE BEEN. IT OPENED UP THE PACIFIC. WE WOULD HAVE HAD MORE ACCESS TO ASIAN PACIFIC COUNTRIES. WE WORKED ON THAT SIX YEARS. NOW IT LOOKS LIKE IT'S ON HOLD INDEFINITELY.
TED SIMONS: AROUND THE WORLD, I READ THAT GLOBAL PRICES ARE DROPPING. COMPETITION IS LOOMING. IF WE DO NOT SUPPLY SOMEONE ELSE WILL. WHAT IS THE LAY OF THE LAND?
STEFANIE SMALLHOUSE: THE USDA FORECAST THAT IN THE NEXT TEN YEARS, OUR MARKET SHARE IS GOING TO DROP. THAT IS BECAUSE OTHER COUNTRIES ARE CATCHING UP WITH US IN TERMS OF EFFICIENCIES AND BECAUSE WE ARE Missing TRADE NEGOTIATIONS. IT WILL HURT US, NO DOUBT.
TED SIMONS: PEOPLE HERE TRADE WAR. THEY THINK MANUFACTURING. THEY THINK ABOUT HARD GOODS, METAL OBJECTS -- THEY DON'T THINK ABOUT AGRICULTURE, DO THEY?
STEFANIE SMALLHOUSE: YOU KNOW IT IS SAD, THEY HARDLY THINK OF US AT ALL AS LONG AS THEY HAVE FOOD TO EAT. I HEAR PEOPLE IN THE ADMINISTRATION SAYING THE POINT IS TO PROTECT KNOWLEDGE THAT WE HAVE, RIGHT? THE TECHNOLOGY, THINGS LIKE THAT. YOU KNOW, FARMERS AND RANCHERS SHOULD NOT CARRY THE BURDEN OF PROTECTING THAT. YOU CANNOT BE A SEMICONDUCTOR OR SHEET OF ALUMINUM.
TED SIMONS: I WOULD ALSO SAY, IF YOU ARE MAKING JOB DEER TRACTORS, IF THEY HAVE NOTHING TO GO OVER, WHAT IS THE POINT?
STEFANIE SMALLHOUSE: I CAN UNDERSTAND THE CHINA ISSUE. SOME OF THE TECHNOLOGY MAY BE IN AG CULTURE. THAT MAKES US LESS COMPETITIVE, SO IT IS A CONCERN, BUT END OF THE DAY, WE NEED TO MAYBE ADDRESS THIS IN DIFFERENT WAYS.
TED SIMONS: ALL RIGHT, STEPHANY SMALL HOUSE, ARIZONA FARM BUREAU. GOOD TO HAVE YOU HERE.
STEFANIE SMALLHOUSE: THANK YOU VERY MUCH.
President Donald Trump is one signature away from imposing more tariffs on China, a move some Arizona lawmakers believe will spark a trade war and hurt Arizona farmers.
Arizona agriculture produces more than what is consumed in the state, resulting in an export-oriented market. Stefanie Smallhouse, President of the Arizona Farm Bureau, says nearly a quarter of what is produced is sent abroad.
“The agriculture industry in Arizona accounts for $23.3 billion of our state economy, so it’s fairly significant and important,” Smallhouse says. “In terms of nationwide, Arizona is important for its diversity. We don’t have a large footprint. Other states don’t have the diversity like we do and the ability to produce food year-round.”
The state is known for its citrus, tree nuts, beef, alfalfa, dates and especially cotton. All of those areas would be affected by the tariffs. About 70 percent of Arizona’s domestic production of cotton is exported, and 20 percent of that is sent to China alone.
China is one of the largest consumers in the global market so finding an alternative buyer won’t be an easy task. There are other countries as well who are willing to jump in as China’s new seller if they refuse to continue buying from the U.S.
“The USDA has forecasted in the next ten years our market share in foreign markets are going to drop because other countries are catching up with us in terms of their efficiencies, and we are missing out on some of these trade negotiations,” Smallhouse says. “It will hurt us, there’s no doubt.”
Initially, Arizona consumers will see prices drop because there is such a surplus of products. While it may look good in the short term, it damages local farms in the long term. Smallhouse says it would lead to “damage that can’t be fixed.” Farmers will go out of business, and prices will start to go up again.
Smallhouse compares agriculture to the game of Jenga. The NAFTA piece was pulled out slightly. The Trans-Pacific Partnership was completely pulled out, and now the tariff pieces are being toggled with. It makes for an unstable business, but Smallhouse says they’re lucky to be a very strong industry.