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Trade deals welcome, but will they translate to exports?

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MARKETS NEEDED: While Wall Street is booming and the talking points tout a great economy, agriculture isn’t getting much of a share. New trade agreements have raised spirits, but there are troublesome signs that the needed sales of agricultural goods may take a while to take off.
Warning signs persist despite optimism for USMCA and the Phase 1 trade deal with China.

The popular talking points say that the economy is in great shape and getting better daily. That’s a comforting thought. And it is true in some spots. Certainly, the stock market is performing well for those with investments or retirement plans. But how about the rest of the economy?

For farmers and agribusinesses, things are certainly not the best they have ever been. Many people are struggling to hang onto their farms and businesses and suicides are occurring at an alarming rate.  

It feels good to think that we’ve “won” and everything is on the right track: China is going to buy $50 billion worth of agricultural products, and the U.S.-Mexico-Canada Agreement is going to usher in an era of North American prosperity the likes of which we have never seen.

There is justified optimism that the long, destructive trade wars may be slowing down and perhaps coming to an end altogether. But the grain markets are sure not responding the way Wall Street is. But how much difference we are going to see over the next several months to a year has a lot of market analysts remaining cautious.

There are some hard realities in play that may have a big impact on how quickly we see exports pick up, carryover stocks go down and prices go back up.

First of all, USMCA really isn’t very much different than the old NAFTA that has been in place for 30 years. There are a few tweaks. But it isn’t going to drastically change anything that will substantively change demand for farm goods.

Second, the China “deal” doesn’t have much that can be called definitive or concrete. There is all kind of language like, “market conditions allowing,” and “given inspection approvals,” that gives China a whole lot of ways to skirt fulfilling any obligations. There’s also a massive problem going on in China in the wake of the outbreak of a new, virulent respiratory virus that so far has just been called “coronavirus” for the generic category it falls into.

In just three months, this virus has killed more people than SARS did in two years. Whole cities are locked down in quarantine trying to stop the spread. Flights are canceled, and shipments of products halted. This is not exactly the stuff that a massive increase in imports is made of. Nor is it the stuff that major outreach projects from the U.S. to promote our products for sale in China is made of.

Get real: If it was you going into an infected zone to try to sell your product, would you hold off a bit?

We have every reason to be concerned that this virus will become a pandemic and that could disrupt markets around the world. It certainly didn’t raise my level of optimism to have the Centers for Disease Control and Prevention confirm six cases of coronavirus in Wichita.

Here is another factor: The deals for grains, meat and other ag products for the next several months have already been struck. And regardless of just-signed trade agreements, the clock is not going to roll backward and pull in a lot of new sales.

While these agreements have the potential to improve exports in the future, it isn’t something that is going to change the bottom line for 2020 in a very big way.

Farmers have taken a hit every year for the last three years. Every indication shows another hit in 2020. That’s just reality and we need to ready for it. The federal bailout has helped in the last two years. It may or may not be there in 2020 and beyond.

It is not something that can be sustained indefinitely. As a resident of Wichita, I know that 2,800 Spirit Aviation layoffs are going to ripple across the supply chain and things are not going to be good in my city in the coming months.

If you’re employed and want a good deal on a pickup truck, an RV or a boat in the coming months, your shopping prospects are bright. If you are an aircraft worker selling off your assets to survive, the picture has a different hue.

I have grave concerns that the people guiding the ship of state aren’t in touch with the realities of the people affected by their decisions. I fear that an election year means the focus will be on the areas with the greatest population — which is not the area that will have the greatest impact on the supply for food, fiber and fuel for the nation.

TAGS: Farm Policy
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