January 18, 2017 Author: Murray Wise Associates
The election ended with a surprising winner and in my judgement, is likely to lead to an administration long on more surprises. We really don’t know what the new administration’s policies affecting agriculture will be. We’ve been witness to a range of possibilities accompanied by predictions of great success or abysmal failure depending on the political position of the predictors.
To be clear, I’m not going to make any predictions. I’d just like to highlight a few issues that affect the agricultural industry particularly as a result of the change in administration.
Here’s my list of some key policy issues to keep an eye on:
Trade: Here you can almost insert one name: China. The Chinese are now our top agricultural export partner, displacing Canada in the past few years. The third largest export partner is Mexico. Given the rhetoric from the campaign regarding two of our top three agricultural product importers, there is potential for significant change.
In its November 2016 Outlook for US Agricultural Trade, the USDA comments, “A change in the U.S. trade relationship with China and Mexico is of particular concern for agricultural competitiveness. Together, these two countries were the destination for an average of almost one-third of total U.S. agricultural exports from 2013-2015. China alone was the destination for roughly 60% of U.S. soybean exports, on average, during this period.” President Trump has not hesitated to suggest that China manipulates it’s currency and exploits trade agreements… and his intention to tear up or renegotiate NAFTA, involving our second and third largest export partners, is also something that could have huge implications for trade and agriculture.
President Trump’s appointment of Iowa Governor Branstad as the Ambassador to China should be a very positive development in trade relations.
Interest Rates and the Dollar: In this area again we are limited to speculation as to actual administration policies based on campaign language. Interest rates are already trending higher and the Fed is expected to raise them as many as three times in 2017. However, the President has been critical of the Fed during the campaign and the development of the actual relationship between the two may lead to a more hawkish agenda. There are also some internal pressures, such as rising wages and oil prices, that may signal an increase in inflation. In turn, higher interest rates coupled with a more “protectionist” trade position may strengthen the dollar further.
Labor and Immigration: Enforcement of immigration laws was a key component of the President’s campaign of course, from deporting illegal immigrants to walling off Mexico and having them pay for it -- strong language that already seems to be softening since the election. American farmers depend on skilled and willing labor, and where Americans are unwilling or unavailable to do the work, foreign workers have filled the need. The fear is that immigration law enforcement will curtail this labor source in the absence of some sort of work visa system for farm workers.
The Environment: This is a critical area for farmers from New England to California, but I don’t find many references to how the new administration would deal with environmental issues from the campaign. President Trump is on record as thinking climate change is a hoax but has not indicated a detailed agenda for environmental policy. He has indicated that he’d like to see regulatory reform and recent EPA assertions would seem to make it an obvious target. The bio-fuel mandate is always a potential target as well.
There is very little than can be definitively said about the new administration’s farm policy agenda. The campaign was filled with sound-bite policy statements that were often quickly withdrawn or modified. Of course, the agenda at that time was to get elected and the approach worked. Now, however, we will spend the next several weeks and months watching as the campaign approach changes to serious governing policy discussions.
Murray Wise founded the Westchester Group in 1986 after acquiring the Champaign, IL division of the Sandage Companies, a traditional farm management and brokerage firm…
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