12 CapitalPress.com
February 19, 2016
Experts generally agree China is not in a recession
CHINA from Page 1
U.S. agricultural exports to China, 10 years
‘No miracle markets’
But they add that the anxi-
eties are amplifi ed by the un-
certainty about the true state
of China’s economy — as
well as investments made by
U.S. farmers and food compa-
nies that assumed the growth
would continue unabated.
While it’s still possible to
make headway in the Chinese
export market, people were
fooling themselves if they
thought the nation’s demand
was boundless, said Nick
Kukulan, CEO of Paramount
Export, an Oakland, Calif.,
company that ships fresh
fruits and vegetables to that
country.
“There are no miracle mar-
kets,” he said. “It’s all just
global competition.”
Cotton provides a harsh
example of the vicissitudes of
the Chinese market.
When China was a top
buyer of cotton around 2011,
the crop was fetching more
than $2 per pound for U.S.
farmers.
Now, the country isn’t
even in the top fi ve of global
cotton buyers and prices are
hovering around 60 cents per
pound.
“It’s one of the key factors
keeping cotton prices low.
China’s policies had a large
impact on the world’s mar-
ket,” said Jody Campiche,
vice president of economics
and policy for the National
Cotton Council.
To some extent, the re-
duced value of overall U.S.
farm exports to China can be
attributed to the global price
decline for major commod-
ities, particularly soybeans,
said Michael Swanson, chief
agricultural economist for
Wells Fargo Bank.
Soybeans that topped $14
a bushel in 2013 are now sell-
ing for about $8.70 a bushel.
China’s economy is also
growing at a slower clip, but
it must be remembered that
its underlying economic base
is now a lot bigger, Swanson
said.
‘Poor visibility’
Investors are also nervous
because of the “poor visibili-
ty” into the Chinese economy
offered by its government, he
said.
While China’s offi cial eco-
nomic growth rate was about
7 percent in 2015, some U.S.
(Billions of dollars)
25.9 25.5
Source: USDA FAS
Alan Kenaga/Capital Press
17.6
12.1
6.7
2006
Don Jenkins/Capital Press
Dockworkers unload containers Jan. 28 from the OOCL Rotterdam, a Hong Kong-registered vessel.
analysts believe it was actual-
ly as low as 4 percent based
on factors such as steel output
and coal use.
“People still doubt the data
that comes out of China,” said
Dan Kowalski, director of in-
dustry research for CoBank,
a major agricultural lender.
“Are they telling us it is as
bad as it is, or is it worse?”
Estimates may vary on the
exact growth rate, but experts
generally agree China is not in
a recession and its economic
expansion is still faster than
that of the U.S.
Even so, the slackening in
China is seen as having a de-
stabilizing effect.
‘Tesla of the world’
With an annual growth
rate that once topped 15 per-
cent, China’s economy was
viewed as being similar to
a hot Internet company or
technology startup.
“China is the Tesla of the
world,” Swanson said, re-
ferring to the electric luxury
car company whose shares
have quintupled in value in
recent years despite posting
net losses in the hundreds of
millions of dollars.
Surging stock prices for
such companies are based
on their “growth story” of
future earnings, rather than
current profits and divi-
dends, he said.
If that story begins to ap-
pear too optimistic, people
fear they’ve overpaid even
if nothing catastrophic has
occurred.
“Any change in that
growth projection suddenly
panics that investor,” Swan-
son said.
The analogy is perti-
nent to agricultural sectors
such as the almond indus-
try, whose fortunes were
propelled to new heights by
China’s explosive economic
growth.
China “came out of no-
where” to become a major
almond buyer, which caused
the value of California al-
mond orchards to triple in
the past five years, Swanson
said.
Farmers who planted
or bought orchards at peak
prices may face financial
problems if their investment
was based on unrealistic as-
sumptions about continued
rapid growth in Chinese con-
sumption, he said.
“You could be devastated
by even a softening in de-
mand,” he said.
Massive spending
Until now, China’s mo-
mentous economic rise
was supported by massive
government investment in
bridges, highways, ports
and housing, which was
accompanied by a mass mi-
gration of people from rural
areas to the cities.
That cannot go on for-
ever, so China must now
shift from an economy that
depends primarily on ex-
porting goods and building
infrastructure to one that’s
oriented toward domestic
consumers, said Lindsey
Piegza, chief economist
with the Stifel investment
firm.
“That’s not a transition
that occurs overnight,” she
said.
With China’s extensive,
and perhaps excessive,
building boom winding
down, there’s bound to be a
negative impact on the price
of raw materials.
“You’re talking about
a decline in aggregate de-
mand,” Piegza said.
The effect is already ap-
parent in the U.S. log mar-
ket.
U.S. log shipments to
18.9
24.2
$20.2
billion
13.1
Down 16.6%
from 2014
8.3
’09
China plummeted 40 per-
cent in 2015 largely because
builders have bought few-
er hemlock logs, which are
used for concrete formwork,
said Gordon Culbertson, in-
ternational business director
for the Forest2Market con-
sulting firm.
“Their housing construc-
tion is down a great deal. It
has reduced the competition
for forest products,” Culb-
ertson said.
Meanwhile, U.S. goods
are more expensive in China
because the dollar has gained
in value against the yuan by
more than 8 percent in two
years, from roughly 6 yuan in
2014 to 6.5 yuan today.
As the U.S. dollar has
strengthened against the
Chinese currency, it has
prompted China to buy logs
from other countries such as
New Zealand, he said. “It’s
magnified by the exchange
rate.”
The overall decline in
China’s imports of U.S.
farm products isn’t due to
dropping demand, but rather
the huge inventories of agri-
cultural commodities that it
has built up, said Kowalski
of CoBank.
“They have outpaced de-
mand, even though demand
has continued to increase,”
Kowalski said.
What seemed like soar-
ing demand for some U.S.
commodities was actually
caused by inflated purchas-
ing, as China simultaneous-
ly tried to prop up domestic
farmers and the processors
who use their crops.
For example, China’s
government bought large
reserves of grain and cotton
to support domestic prices
while allowing significant
imports of the crops to meet
demand from its feed-mill-
ing and textile industries,
said Fred Gale, an econo-
’12
2015
mist with USDA who stud-
ies China.
Import quotas shrink
Now, the government is
shrinking import quotas so
its domestic processors can
reduce the stockpiles of grain
and cotton, he said. Chinese
offi cials similarly overesti-
mated the nation’s demand for
dairy products.
“They accumulated too
much inventory and demand
slowed down,” Gale said.
At the same time, sales of
specialty crops such as U.S.
berries and nuts, which are
often considered luxury items
in China, have also been hin-
dered by anti-corruption ef-
forts, he said. Amid the weak-
ening economy, the central
government has pressured
Chinese offi cials to be less os-
tentatious with banquets and
gifts of imported food, Gale
said.
“That’s cut into demand
for these high-end things,” he
said.
Protectionism also plays a
role in the trade dynamics be-
tween China and the U.S.
Between 2012 and 2014,
for example, China claimed
that a crabapple variety used
in Washington to pollinate
commercial apple orchards
transmitted a bacteria that
threatened its domestic indus-
try, said Desmond O’Rourke,
founder of the Belrose Inc.
market analysis fi rm.
Because trade agreements
prevent China from creating
“ad hoc” hurdles to imported
goods, the government uses
food and plant safety as an ex-
cuse to insulate its domestic
producers from competition,
he said.
“They keep fi nding new
reasons for blocking imports
for a while,” O’Rourke said.
“I suspect it will happen even
more as their economy slows
further.”
Harney County has lost 99 percent of its wood products jobs since 1978
CHANGE from Page 1
“I’m concerned the atten-
tion we’ve gotten on the issue
could get lost, because people
in urban areas and voters are
so far removed from the issues
of Eastern Oregon,” Fast said.
“They never really understood
what people were protesting
in Harney County. They don’t
recognize we raise cattle on
public land.”
Meanwhile, Rep. Walden
said he’ll continue working to
bring “meaningful changes” to
federal forest and land man-
agement policies. “We need to
foster a more cooperative spir-
it between the federal agencies
and the people who call areas
like Harney County home,”
Walden said in a prepared
statement.
Andrew
Malcolm,
Walden’s spokesman, said that
means increasing logging and
thinning of forests to provide
jobs and to reduce wildfi re
risk, allowing local input on
land-use decisions, ensuring
public access to public land
and eliminating “burdensome”
regulation from agencies such
as the EPA.
Other opportunities are per-
colating.
In early March, the West-
ern Governors’ Association is
holding its third workshop on
species conservation in gener-
al and the federal Endangered
Species Act in particular. Led
by Wyoming Gov. Matt Mead,
the workshops are intended for
states to share ideas on best
conservation practices and to
“operate as authentic partners”
in implementing the ESA.
That’s a slow grind but
potentially a big deal. From
Northern spotted owl, to great-
er sage grouse, to various
frogs, butterfl ies and fi sh, ESA
listings and lawsuits — or the
threat of them — have tied nat-
Les Zaitz/The Oregonian via AP
A sign of the National Wildlife Refuge System is seen at an entry
of the wildlife refuge about 30 miles southeast of Burns, Ore.,
Sunday, Jan. 3, 2016. The refuge was the site of a 41-day armed
protest over federal land management. notforsale
ural resource industries, agen-
cies and rural communities in
knots. Many in the West be-
lieve the BLM, Forest Service
and U.S. Fish and Wildlife
Service, which between them
manage 529 million acres, are
entangled to the point of paral-
ysis.
The degree to which public
land agencies are hamstrung
by confl icting legislation, lit-
igation, lack of budget and
sometimes by failure of lead-
ership would surprise the gen-
eral public, said Ann Forest
Burns, vice president of the
pro-industry American Forest
Resource Council in Portland.
“All those well-meaning
Americans who don’t belong
to the extreme of either po-
litical persuasion would be
shocked, appalled and calling
for reform in how lands are
managed,” she said.
Like many others, Burns
believes the sage grouse col-
laboration between ranchers
and regulatory agencies might
be a model for the future.
Ranchers, beginning in Harney
County, signed voluntary hab-
itat conservation agreements
on private land that ultimately
were credited with keeping the
bird off the endangered species
list in 2015.
The sage grouse agree-
ments were a “hidden benefi t
of the spotted owl debacle”
Burns said. The spotted owl
listing as threatened in 1990
is widely blamed for decimat-
ing the timber industry in the
Pacifi c Northwest, as federal
forests dramatically reduced
harvests. The potential sage
grouse listing was often re-
ferred to as “the spotted owl
on steroids” because it would
have involved millions of
acres in 11 states.
Everyone involved “came
to the table because they saw
what happened to rural com-
munities,” Burns said. “If you
don’t want to look like that, we
have to fi nd another way.”
The economic and social
damage in rural communities
is real, she said.
“If you’re an 18-year-old
man living in John Day, or
Burns, or Baker, if you’re
smart but not ready to go to
college, what do you do that
will give you self respect?”
Burns asked.
In a generation past, they
could work the greenchain line
down at the mill, or work in
the machine shop. “There was
real work,” Burns said. “Re-
spectable work. It made you
feel like a responsible person
until you moved on to do the
next thing. That’s gone now.”
Harney County, scene of
the militia takeover, has lost
99 percent of its wood prod-
ucts jobs since 1978, accord-
ing to a state analysis. While
the number of Oregon jobs in-
creased 74 percent since then,
the number of total Harney
County jobs decreased 10 per-
cent. The county has lost 1,200
people since 1980. Today, 65
percent of the county’s school-
children are eligible for free or
reduced-price lunches.
“How would you feel if
you were a parent and couldn’t
provide basic nutrition for
your children, particularly if
you had conservative values
that are prevalent in rural com-
munities?” Burns asked. “You
don’t believe government is
the answer, but the govern-
ment is feeding your children?
If that doesn’t break your
heart, nothing will.”
Bruce Andrews, retired di-
rector of the Oregon Depart-
ment of Agriculture, said most
government land managers
live in the communities where
they work, go to the same
churches and eat at the same
pubs as other rural residents.
In some cases they are imple-
menting national policies that
slowly moved the communi-
ty out of the decision-making
process.
“I don’t want to cast it as
an us versus them issue,” An-
drews said. “Clearly there will
be a heightened sense that if
we want to avoid either-or
confl icts in the future, we need
to talk.”
When he was ag depart-
ment director, from 1989-98,
ODA’s focus was to work
within the community. “It al-
ways works best when you try
to work in partnership, even
when you’re trying to regulate
somebody,” he said.
“The fear is, let’s not have
more militia takeovers, that’s
clearly outside how most
people view how the Consti-
tution works,” Andrews said.
An overwhelming majority
of rural residents did not sup-
port the Malheur takeover, but
there is angst in the communi-
ties, he said. “They don’t want
to gloss over the fact that the
land is not necessarily working
as it should.”
The Oregon Cattlemen’s
Association, whose members
were at the heart of much of
the debate that accompanied
the takeover, believes the sit-
uation at the refuge south of
Burns helped illuminate the
issue of government over-
reach. In a prepared statement,
the OCA said it will continue
“sincere and constructive con-
versations” with government
agencies. OCA President John
O’Keeffe said approaching is-
sues in a productive and peace-
ful way can help mend the ur-
ban-rural divide.
“We are glad that the stand-
off was concluded without
further bloodshed,” O’Keef-
fe said in the statement. “We
are hopeful the community of
Burns will be able to start to
heal.”
Executive Director Jerome
Rosa said the OCA is working
with legislators and legal coun-
sel to address one of issues that
ignited the occupation by Am-
mon Bundy and his follow-
ers: the federal re-sentencing
of Harney County ranchers
Dwight and Steven Hammond.
They were convicted of arson
for burning BLM land, served
time in prison, then were sen-
tenced to additional time be-
cause the federal judge who
oversaw the original case
didn’t follow minimum sen-
tencing guidelines. The occu-
pation took place as they were
reporting to prison.
By coincidence, the Bu-
reau of Land Management
announced a “Planning 2.0
initiative” about the time the
last occupier was surrendering
to the FBI Feb. 11. The agen-
cy said it is trying to increase
public involvement and make
its planning process “more
collaborative, transparent and
effective.”
The changes will improve
the BLM’s ability to respond
to environmental, economic
and social realities, including
the need for strong science and
“early and regular public in-
put,” the agency said in a news
release. “The revisions will
enable us to be more agile in
addressing challenges like pro-
liferating invasive species and
wildfi re, helping to meet the
Nation’s need for energy, and
conserving important wildlife
habitat. At the same time, these
proposals are carefully crafted
to bolster our commitment to
working early and often at the
local level with our partners.”
While it might have seemed
a response tailored to the Mal-
heur takeover, a BLM plan-
ner in Washington, D.C. said
the revisions have been in the
works for fi ve years. “There’s
no relationship between the
two,” planner Mitch Snow
said. “You can’t draw a line
from here to there.”
U.S. Fish and Wildlife Ser-
vice, which operates the Mal-
heur refuge, said it welcomes a
“new beginning” now that the
takeover is resolved.
“Above all,” said Jason
Holm, USFWS assistant re-
gional director for external
affairs, “we will begin to revi-
talize our deep connections in
the local community and re-
sume the dialog that has made
Malheur a model of collabo-
rative conservation.”