Trade Wars Might Be Easy To Win, But There Have Certainly Been Losers.

I finished soybeans last week. I might also add a popular mantra in agricultural circles, just “in front of the rain”. Sometimes weather can be our bane of existence as farmers and that certainly has been the case over the past week in Southwest Ontario. Rain and cloudy weather has been a characteristic this fall and it certainly continues as November dawned.

I’ve got corn ahead of me, like many other Ontario producers. From the sounds of it, it might be a little bit challenging regarding grading. However, there are always issues with vomitoxin in Ontario corn, some years worse than others. I was reminded this morning that high DON levels in corn, based on Ontario studies are connected with crop rotation and tillage, while 40 to 60% of variability has to do with the specific corn hybrids and weather. It will be a few days before it dries up now, but I can just feel the fun beginning.

Later this year I will be speaking at the Innovative Farmers Association of Ontario meeting near Milton Ontario. Interestingly enough, my topic will be 2019 Grain Markets: Tweets and Trade. It is so 2018 that “twitter and trade” would be having such an impact on our grain prices. In fact, if you go back 15 years, that title would have very little to do with grain prices as twitter wasn’t even invented. Needless to say, that social media platform has had a direct impact on grain prices this year. That’s what you get when you have a trade war and the most powerful man in the world tweeting.

I will give you a for instance. The soybean market has been consolidating over the last week, this morning trading at $8.48. Then the President tweeted the following.

“Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on trade. Those discussions are moving along nicely with meetings being scheduled at the G20 in Argentina. Also had a good discussion on North Korea!” (Tweet from President Trump)

Currently as I write this column, soybean futures are up $0.30 a bushel. That is the effect of a faint notion of soybean peace between China and the United States, tweeted by the most powerful man in the world. Of course, I tweeted back asking my proverbial question, did you ask President Xi Jinping about those pesky soybean tariffs?

I do not know the answer to that question, but I’ve posted it for several weeks now. It is one thing to have a trade war and have the resultant hurt to American agriculture and its problem fix it. Usually the fix to these things move at glacial speed. Take for instance the CETA agreement between Canada and the European Union, which took about nine years to put together. However, in the case of China and the United States, I always felt there was a distinct possibility of it moving very quickly because of the American President. He usually does things very quickly and abruptly and who am I to say what was really said on that phone call and who am I to really know what he’s thinking?

In other words, I still don’t know, but I know it could change quickly on an early morning tweet. From an American agriculture perspective, it can’t come soon enough. DTN’s Chris Clayton wrote an excellent piece this week where he wrote about a study by the Farm Foundation who hired some Purdue economists to estimate the impacts on US agriculture from the United States, Mexico Canada trade agreement. (USMCA) In the piece Chris related after US tariffs were applied to Canada and Mexico, retaliatory tariffs actually reduced US ag exports by $1.8 billion. He recounted that once Chinese soybean tariffs were included, US agricultural exports could fall by $7.9 billion. So the trade gains from USMCA have been overwhelmed by the impacts of Chinese tariffs.

Those are staggering numbers and staggering trade cuts. Of course we know that American growers are being compensated for half their production. This is all happening in front of midterm elections, which are happening on Tuesday. As of now, the polls say, there may not be much change in the US Senate, but there maybe a change of party control in the US House of Representatives.

The midterms are sort of a litmus test on our agricultural trade future. Many analysts have mused there may be a trade deal after the midterms. I’m not so sure, but I also know, this trading tweeting environment is something that cannot be predicted. My hope is lightning strikes and it all goes away. My hope is the same impulsive actions on steel and aluminum that precipitated this $9.7 billion dollar problem reverse just as quickly.
Agriculture needs all the markets we can find. Trade wars might be easy to win, but along the way, there have certainly been losers. We know who they are.