What does Donald Trump’s election victory means for agriculture ?
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Some might say a president who gained power with the motto “drain the swamp” might appear a boon for agriculture.
But whether he turns out that way will require a more measured tone by Donald Trump when in office than that he voiced to win power.
Sure, farmers may well enjoy something of a honeymoon for now from his victory, which is likely to take the dollar on a weaker course, for now, than it would have done had Mr Trump’s Democrat rival, Hillary Clinton, won the vote. The greenback fell 2% at one point overnight (although that decline had retreated to 0.5% long before breakfast time in New York).
A weaker dollar improves the competitiveness of US exports – which are a big deal in agriculture, estimated by Washington at $127.0bn in the year to the end of September, and seen rising to $133.0bn in the current financial year, ahead of imports at $114.2bn.
Same old, same old?
But whether Mr Trump remains in a happy marriage with agriculture will depend on more than what his reign does to the currency. It may also depend on more than any direct agriculture reforms.
If the low profile that farming held in the run up to the election is a guide to how it will score afterwards, farmers should expect little in the way of radical change to farm policy.
Indeed, what little is known about Mr Trump’s thoughts on the sector, such as his being “totally in favour of ethanol, 100%”, suggest that growers and their John Deere tractors, of which he is “a big fan”, won’t have to make too much of a deviation – on this score – from their current course.
What farmers should be concerned about is the longer-term course of trade. Where Mr Trump has been more vocal is on trade policy. Besides suggesting a withdrawal of the US from the World Trade Organization, Mr Trump has threatened to scrap free trade deals including the North American Free Trade Agreement with Canada and Mexico, which he blames for costing US jobs.
Indeed, he has talked of 35% tariffs on goods imported from Mexico. Furthermore, he has talked of imposing tariffs of 45% in US imports from China.
Tit for tat?
That matters, as he could not expect such moves to go unopposed. The US could expect to find its own exports subjected to tariffs too.
When China is the top buyer of US agricultural goods, forecast at $21.5bn in the year to September next year, and Mexico third, on $18.0bn, their retaliation would leave the US facing a monumental effort of finding alternative buyers to avoid a back-up of agricultural commodities on the domestic market, and a collapse in prices.
Certainly, there are limits to the extent that the likes of China could avoid buying US crops, at least short-term, with limited alternatives for the likes of soybeans, which is processed into the soymeal guzzled up by China’s huge hog herd. But that market stranglehold would only be likely to last for so long.
Europe’s sugar beet industry, developed in response to British blockades on sugar cane during the Napoleonic wars, still stands as testament to the ability of demand to stimulate surprising sources of supply.
Part of an Article from Agrimoney.com
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Post available in: English