Farmers and ranchers are being told by supporters they are the beneficiaries of two seismic trade agreements—the United States-Mexico-Canada Agreement and the first phase of a pact announced with China.
Many details, as always, are unknown. Putting together an estimate so farmers and ranchers know what to do when it comes to spring planting season and how to refine their marketing plan for the remainder of 2020 remains hazy.
What is known is that there is much grain in storage across the countryside as trade wars have limited exports in the past couple of years. According to the January World Agricultural Supply and Demand Estimates report, as noted by Associate Editor Jennifer M. Latzke in the Jan. 20 edition, the beginning year stocks for corn are up. Meanwhile wheat and soybean stocks are down slightly as producers had to recalibrate based on low per-bushel prices the past couple of years.
It is going to take time to deplete inventories, and Mother Nature has yet to weigh in.
The trade wars, as previously reported, have been felt by manufacturers who help farmers and ranchers to become the world’s most efficient producers. Companies had to buy steel and aluminum at much higher prices and have found that in a down farm economy it is harder to sell equipment. As noted in our cover story this week farmers have been cutting expenses, and that is likely to stay in place until higher prices return.
No sector has been spared because much of the “low-hanging fruit” was harvested several years ago. It took time to get to where we are today and it will take time to move ahead, although there is hope the agreements will spur optimism. The dose of good news comes at the right time.
Seeing the trade agreements with Canada and Mexico are going to provide stability as they are the U.S.’s top customers. The USMCA replaces the North American Free Trade Agreement that was first approved during the first term of President Bill Clinton.
The separate agreement with China appears to mean the Chinese have agreed to purchase at least $40 billion in U.S. farm commodities annually over the next two years, as reported by Sara Wyant and included in a column that appeared in High Plains Journal on Jan. 20.
President Donald Trump said he was listening to farmers and ranchers and even though it has been a painful process, perhaps the light of the tunnel will be one in which farmers and ranchers can see a substantial boost to their income statements and balance sheets.
The president deserves credit for working to address inequities in trade policies that evolve as a result of changes caused by technology and unrelated issues that surface many years after the original ink dries. As with any agreements, before the lavish praise is given and victory laps are celebrated, it is going to take time to know who will reap the rewards.
Many of the major commodity organizations have voiced their approval. They believe that ultimately consumers in the U.S. and around the world will benefit from the two major agreements, and when that occurs farmers and ranchers will benefit, too.
Will there be a windfall or disappointment? Only time will tell, but it is important for farmers and ranchers to stay engaged and communicate with their organizations and lawmakers.
Dave Bergmeier can be reached at 620-227-1822 or [email protected].
