Anti-trade sentiment worries grain firm

The industry could be in a ‘very bad spot,’ says Bunge

Dan Basse speaks at farm industry meetings around the world and he’s noticed a trend in the last six to 12 months.

Growers in Argentina, Russia, Canada and Brazil smile at the meetings, but most American farmers do not.

Farmers in the United States are frowning because they’re suffering from a strong U.S. dollar and low commodity prices. Meanwhile, farmers in other regions benefit from their relatively weak currencies, which prop up the value of corn, soybeans and canola in their countries.

“The U.S. farmer, he’s not doing very well today,” said Basse, a market analyst who runs a firm called AgResource.

“The United States farmer has been kind of short-sheeted by the whole thing.”

If the inequity persists, the U.S. government may adopt a policy to support its farmers, which could mean additional subsidies or a border tax on food imports.

Complicating matters, U.S. President Donald Trump and the new administration there is committed to a policy of “America First,” so a crackdown on imports of canola oil, wheat or Mexican avocados is possible.

Tim Gallagher, executive vice-president of Bunge North America, said the anti-trade sentiment and desire to renegotiate trade deals is worrisome.

“How is that going to turn out? That’s a big deal,” said Gallagher, who participated in a canola industry panel at the Canola Council of Canada conference, held March 7-9 in Winnipeg.

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“That’s a big deal for our industry and for Canada, whether it’s the grain trade or it’s processing…. As we get into NAFTA (North American Free Trade Agreement) it’s not clear, at least it’s not clear to me, what the trade-offs are going to be.”

Gallagher encouraged members of the canola council to vigorously lobby to maintain free trade of canola.

“To recognize these threats and fend them off. To show the benefits of trade,” he said. “To, in effect, protect the industry. I think a lot of work needs to be done on that. It could put us in a very bad spot, very quickly.”

A border tax or restrictions on agri-food trade could have the greatest impact on Canada and Mexico.

U.S. data from 2014 highlights several factors:

  • Americans imported $22 billion in agri-food from Canada and $19 billion from Mexico.
  • China, the number three food exporter to the U.S., was well behind at $5.7 billion.

Jeff Vassart, Cargill Canada president, said the Canadian government is being proactive in its promotions for the mutual benefits of free trade.

“We’ll monitor the situation like we do all over the world. It (anti-trade) is not only a trend in the U.S.”

With corn futures below $4 per bushel and new crop wheat trading around $4.60 per bu. in Chicago, it has become difficult for America farmers to make money on those grains.

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Brent Gloy, an ag economist and farmer from Nebraska, said producing wheat is pointless.

“Right now it is horrific, economically,” he said.

“In most cases we’re getting to the point where revenues barely exceed marginal costs.”

In the past, the U.S. government could change the supply dynamic with programs that encouraged U.S. farmers to reduce seeded acres.

But such programs no longer work because they promote additional acres in Ukraine, Russia or Argentina, Basse said.

The U.S. government will need to act if American farmers continue to lose money, but Basse doesn’t think a border tax is realistic.

American consumers are accustomed to cheap food and a policy that increases prices could cause a political backlash.

“When we talk about food, people are always reluctant to put on too much, in terms of a tariff,” Basse said. “To put a tariff on canola oil or canola coming in… seems unlikely.”

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