Spring Needs to Bring Two Thaws: Snow and Ag Trade
Posted on March 6, 2019
For those of us who have slid, shoveled, and skated through the wildest up-and-down February weather in years, here’s a warm thought: corn planters are rolling in southern Texas.
Need another reason to plant a smile on your face? In eight weeks, corn planters will be running all over today’s wintry Midwest.
After that brief pleasantness, however, the outlook gets pretty cold pretty fast. Early February reports from the U.S. Department of Agriculture (USDA) strongly suggest that average—not good, not great; just average—2019 crop yields will deliver less than average prices.
Worse, last year’s trade wars with China, Canada, Mexico, and the European Union (EU) continue. And that’s despite the finally-finished 2018 Farm Bill that, once again, places American exports at the center of yourfarm and ranch’s profit plan for years to come.
According to May 2018 data compiled by USDA’s Foreign Agricultural Service, exports account for 76 percent of all American-raised cotton, 59 percent of all sorghum, 35 percent of all rice, 50 percent of all soybeans, 46 percent of all wheat, 21 percent of all pork and corn, 16 percent of all poultry, 15 percent of all dairy, and 10 percent of all beef.
That means, on average, American agriculture exports 20 percent of everything it grows. Given our farmpolicy, in fact, we must export 20 percent of everything we grow if U.S. farmers and ranchers are to have a fair shot at profit.
It also means that today’s frozen standoffs between the White House and our biggest, most dependable ag customers must thaw to head off another year of melted margins. Last year, according to a Feb. 7 Wall Street Journal front page story on a recent “wave” of farm bankruptcies, “(M)edian farm income for U.S. farmhouseholds was a negative $1,548… despite record productivity…”
But the fuel for any thaw with any tariff-targeted nation is anyone’s guess. In fact, today’s trade fights with our biggest customers requires moves by the White House that the White House isn’t prepared to make.
For example, the EU recently reinforced its strong stand against including agriculture in any upcoming U.S.-E.U. bilateral trade talks. “We’ve made it very clear that agriculture would not be included,” the EU trade commissioner repeated Jan. 9.
The White House refuses to acknowledge the EU’s stand and, until it does, the talks will remain just that—all talk, no deal.
That’s standoff one; standoff two is equally frozen.
Mexico, the U.S., and Canada continue to operate under the 1993 NAFTA deal even though the White House tariffs against both—and their retaliatory tariffs on U.S. ag goods—have everyone eyeing each other with deep distrust. Yes, there is the pending NAFTA 2.0 deal awaiting approval by all three but, say Mexico and Canada, American tariffs must be removed before any endgame begins.
Even if the Trump Administration did remove the tariffs—it requires but a Presidential nod—approval of the new trade deal must go through the Democratically-controlled U.S. House of Representatives. The chances of Democrats handing Donald Trump a political victory with the 2020 presidential campaign season well underway is roughly equivalent to the old snowball surviving in, well, you know where.
Last, but not least, is China, which, ironically, may be the easiest trade nut for the tariff-loving White House to crack. The reason is arithmetic: The U.S. buys nearly $400 billion more of Chinese goods than China buys of U.S. goods. As such, any prolonged trade fight between these consumer giants threatens China’s economy four times more than ours.
In mid-February, that reality began to take root in China-U.S. talks. A wild card, however, is the White House overplaying its advantage. Still, both appear ready to extend their March 1 deadline if a path to reopen trade channels can be seen.
It can’t come soon enough because if trade relations with our best ag export customers remain frozen afterfarm country begins to thaw, it’s going to be a long, hot summer for ranchers, farmers, and politicians alike.
© 2019 ag comm