US farmers shouldn't panic – yet – about the threat to their
crop exports posed by President Donald Trump's trade agenda.
Mr Trump's broadside to Mexico, a huge buyer of US
agricultural shipments, during his first few days of office has provoked
considerable alarm over the potential for retaliation.
Broker CHS Hedging, for instance, warned that a "material
slowdown in US exports [to Mexico] could be catastrophic"
The direction of Mr Trump's early travel in office has also
lent support to ideas that he will realise pre-election pledges for a crackdown
on trade with China, another big buyer of agricultural commodities, many from the
But there are two reasons for calm among US farmers - for
Bark vs bite
The first is that the trade wars which might appear to be on
the horizon never materialise.
Mexico's rank in imports of selected US ag export products
Biggest importer: corn, dairy, pork, rice, soymeal
Second-biggest importer: sorghum, soybeans, soyoil, sunflowerseed oil, wheat
Data: so far in 2016-17, except Jan-Oct 2016 for dairy. Sources: USDA, USDEC
Mr Trump's bark may well prove worse than his bite – he has
already watered down Friday's anti-immigration order aimed at seven
predominantly Muslim countries. And even he does not temper his policy, the rest
of the US legislature might.
The second is that even if Washington does get into trade
battles, it is nowhere near certain that the likes of China and Mexico would
respond with punitive bars on agricultural imports from the US.
In both countries, food prices are a particularly warm political
hot potato, which may make Mexico - the top importer of US corn, pork, soymeal
and wheat - and China, the world's biggest buyer of crops including soybeans,
reluctant to bring agriculture into the front line of battle.
Sure, Beijing has already slapped big import tariffs on imports
of US distillers' grains (DDGs), a corn-derived feed ingredient, often used as
an alternative to soymeal. But that is one ag product China can do without,
given its huge domestic corn stocks, and mammoth soy processing industry.
Furthermore, even if Beijing and Mexico City were to
introduce big hurdles on imports of US agricultural products, that may not be
as big a disaster for US farmers as it first appears.
For China and Mexico to source crops from origins other than
the US would displace other importers – which may well resort to the US for at
least some of their needs.
To some extent at least, what the US lost in trade with the two
importers in question it would gain back from other buyers.
But that does not mean that the US should hope to escape
unscathed from belligerence in trade – just that the damage may be more slow burn
than quick hit.
China's rank in imports of selected US ag export products
Biggest importer: cattle hides, linseed oil, sorghum, soybeans, soyoil
Second-biggest importer: cotton
Data: so far in 2016-17. Source: USDA
Gaining a reputation as an impulsive and capricious partner
would be a big turn-off, difficult to reverse, for importers, many of whom
favour reliability far above price in their agricultural commodity origin. For
a livestock farmer, for instance, a broken grain supply contract may mean no feed.
Furthermore, in disrupting ag trade, the US would be unleashing
forces over which it has little control, and which could prove highly
Recall the sugar beet industry - whose development was
prompted by Napoleon in the face of UK blockades against supplies of cane sugar
to his empire – stands as a reminder of the lasting and unpredictable impact of
The need for China to find alternative soybean supplies, or Mexico
to find new corn sources, could drive export trade to US rivals, custom which
might never find its way back to the US.
Already world corn production, for instance, is broadening
its geography, with new seed varieties expanding the crop's growing range to
the likes of Russia – for which 2016-17 looks like having set another harvest
And Russia has already shown, in wheat, what it is capable
of in grain trading – turning from a net importer at the start of this century
to the world's top exporter now.
Mr Trump might want to think carefully before giving Moscow
another reason to cheer his appointment.
Agrimoney.com will later this week publish a free-to-download analysis report on Sonny Perdue, who Mr Trump has appointed US agriculture secretary.
The briefing will be available from the Agrimoney Live website.