I thought Bill Wilson, a North Dakota State University ag economist and an expert on the international grain trade, said some scary things at the North Dakota CornVention last week.
“A killer for soybeans …”
“A huge challenge for agriculture …”
“We could survive, but it would be burdensome, costly and risky ...”
Those were the phrases Wilson used when responding to farmers’ questions about President Donald Trump’s position on trade.
Less than 10 days after taking office, Trump killed the proposed Trans-Pacific Trade Partnership. He crossed swords with Mexico over manufacturing jobs and immigration, threatening to withdraw from the North American Free Trade Agreement. He complained repeatedly about Chinese trade practices.
“Can we survive it?” one farmer asked Wilson, referring to a trade war with Mexico and China.
“We can survive it,” Wilson said, but added that trouble with China “will be killer for soybeans.” China is the biggest buyer of U.S. soybeans. If the Chinese government gets upset enough with Trump, it could stop buying soybeans from the U.S. and source all its supply from South America and the Ukraine. The U.S. would have to try to sell its crop to Europe and the Middle East.
It would force a “tremendous rearrangement” in global ag trade, Wilson said.
The situation with Mexico isn’t any better. Thanks to NAFTA, Mexico now buys a lot of corn, wheat and soybeans from the U.S. In return, the U.S. gets labor, avocadoes and broccoli, Wilson said.
NAFTA is about as perfect a trade agreement for agriculture as the U.S. will ever see, he said.
Trump promises to get a better deal for the U.S. by negotiating with individual countries, but Wilson said he doesn’t know if that’s possible. Bilateral trade deals have seldom been successful for agriculture.
What could a trade war means for you?
Support for commodity groups is critical as they lobby the Trump administration.
Clearly, despite the demand for corn and soybeans, the future is uncertain.
In 1975, the U.S. signed a grain deal with Russia, promising to supply the communist country with grain to feed its people. It created the boom in agriculture in the latter half of the decade.
In 1980, President Jimmy Carter imposed a grain embargo on Russia for invading Afghanistan. The embargo only lasted about a year until President Ronald Reagan was elected and took office. He lifted the embargo. But grain prices had collapsed. Russia discovered it didn’t need the U.S. It could grow its own grain in the Ukraine and buy whatever it was short elsewhere. The U.S. never got the market back. The slide into the 1980s farm crisis began.
Is history about to repeat itself? I certainly hope not. But the trigger is there.