Tuesday, January 9, 2018

Grain And Livestock Futures All Down This Morning After Trump's Talk To The American Farm Bureau Yesterday.

     Ag futures markets this morning opened with a yawn after President Trump gave his speech to the American Farm Bureau convention in Nashville yesterday.  The trade is indfferent, and with good reason.  It wasn't long before it became clear  that Trump hasn't got much of a clue
Trump Talking Ag
Out Of His Element
about what's going on in farm and ranch country when he promised "I will take the first steps to expand access to broadband internet in rural America so you can compete."  Cripes, when I was trading and brokering cattle and grain (both in physical and futures markets) back in the '90s just about every producer I knew in South Dakota had access to real time news and pricing information via satellite or hardwired internet.  They were in a position to compete with the best of 'em when it came to "price discovery"--the technical term for market prices, both on exchanges or at local elevators and sale barns.  Fact is, after 12 years of trading options and ag futures in Chicago, I re-located to the beautiful Black Hills because the information technology revolution gave me the same access to markets in Rapid City, South Dakota, that I had at the intersection of Jackson and La Salle Streets in the heart of the Chicago Loop's financial district.  


     Trump's promise of better access to information is meaningless when it comes to dealing with the real problems in the farm and ranch belts.  Trump added to this diversion from those problems by crowing about the estate tax.  On this one he outright lied, saying that "most family farms" would be spared "the punishment of the deeply unfair estate tax."  No, most family farms, in fact about 98% of them, per USDA, would not have had to file estate tax returns in 2016.  Where Trump comes up with that "most family farms" bit is incomprehensible, but a lot of people out there continue to buy the fiction.  It remains a talking point that won't die
     Then there's NAFTA.  Trashing the trade deal was one of the pillars of Trump's presidential campaign, but South Dakota ag producers know its importance.  Giving it a few words in his speech yesterday, Trump said he is "working very hard to get a better deal for our country and our farmers."  I doubt that there's a better deal possible, considering North American ag sales by U.S. farmers have grown exponentially as a result of the existing deal.  Last November South Dakota Department of Agriculture sent out a news release saying that since NAFTA's inception, ag exports to Mexico and Canada grew from $9 billion annually to $38 billion last year. South Dakota ships 62% of its foreign ag exports to Mexico and Canada. Trump may be trying to get a "better deal" for American farmers, but the initiative, from an ag producers perspective, looks more like an effort to fix something that isn't broken.  Our ag industry has good reason to be concerned that our NAFTA partners can start seeking their farm goods elsewhere if Trump's revisions or outright abandonment of NAFTA make our products less financially competitive. 
     I couldn't find anywhere in the text of his speech a mention of the most pressing issue in our ag industry--money.  Mainly, ag producers have been seeing a steady drop in their income since 2013, and the widely followed USDA's Farm Futures site is looking for an income dropoff in 2018I've also seen forecasts for slight improvement next year, but nobody's talking about a reversal of the multi-year trend.  Trump's silence on the matter yesterday in Nashville reflects his lack of understanding about how global markets are essential to the health of American farms and ranches.  Exports represent about a 20% share of our ag sales and consistently account for a balance of trade surplus within their category.  Bashing global trade is anathema to farmers and ranchers, and given the steady erosion of farm income in recent years, Trump should be aggressively seeking out foreign markets as a way to prop up sales for Americans. 

8 comments:

  1. Trump doesn't know where the products that make up the Big Mac's he stuffs his face with come from.

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  2. John,

    Yesterday I visited with a sustainable long time multi-generational Dairy farmer in Minnesota that I door knocked for in 2016 and a former DFL legislator was informed because of the recent Trump/Congressional actions plus Industrial AG/Dairy CAFOS flooding supply and driving prices down he is selling all of his Dairy cattle and will focus on grains. He is fairly young still and is just tuning over operations to his sons. I'll see him Saturday and see if there is any chance he can transition to Organic but I'm sure he has explored that option since a number of his friends have already transitioned and could get better prices. My heart just sank after he told me. Just a heck of a guy, is a moderate and periodically crossed party lines to vote on legislation when Arnie Carlson was Governor.

    Miranda Gohn

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    1. I've read that as a trend that also results in less economic activities in rural communities and a continuing loss of soil resources. Do the farmers going organic have a big metro market nearby?

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    2. John,

      I door knocked with an Organic Dairy Farmer on this former legislator's campaign back in 2016 and she said they were doing pretty well and prices were more stable. Yeah they have a good market not just in the Twin Cities but also in other more populated areas and even some in Greater Minnesota. It's not only soil health but Minnesotans are becoming more aware of what is happening to their water quality along with other issues.

      Miranda Gohn

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  3. John, do you buy organic or check the prices compared to other produce or meat? Most people, myself formerly included, think that the reason for organic being so much higher than regular is that the producers are skinning the organic buying public, But that is not the case. The real reason is that demand far outstrips supply and just in other cases of supply and demand, when there is not enough of the product the price will go up.

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    1. Appreciate the comment and think you're right. I'll pass on answering the question as I don't want to make it a practice of disclosing my consumer behavior here.

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    2. Oh, I apologize, I probably didn't word my answer and question right. I didn't mean for you to do that.

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    3. No prob, Lanny. Just didn't want you to think I was ignoring you.

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