Trumpian uncertainty in farm and food markets

A perfect example of how the market isn’t one thing, one being, or one organism was the immediate sell-off then almost immediate rebound of stock prices with the surprising and shocking election in November of Donald Trump as U.S. president.

Stocks sold off dramatically as those panicked by his ideas and behaviours (or assuming others would be) stampeded out of the market, then those excited by his policies and ideas stormed into the void and created a rally. The market is a diverse community and it doesn’t act together.

That’s the same situation with farmers, grain companies, railways, food processors, life science companies and the rest of the farm and food industry. “Farmers” aren’t thinking or doing anything today. “Some farmers” are. As a journalist I’m often annoyed by reports or stories that talk breezily about what “farmers,” “men,” “environmentalists,” “consumers” or any other multitudinous group are doing or thinking today. Adding “some” as a modifier helps us keep in mind that not everybody is likely to be acting the same as the majority, or that there might not be a majority at all.

I’m saying this because I’m pondering how the farming and food industries are going to react to the tremendous uncertainty introduced to world markets by Trump’s election. Existing international trade deals could be unravelling. Proposed trade deals are dead or in trouble. Trade wars could be about to break out. That’s a heck of a knock to the confidence about ever-expanding market access that most Canadian, U.S. and world that agri-food industries have been relying upon when deciding whether or not to invest in expansions, modernizations or new ventures.

At the same time, Trump has vowed to cut taxes, boost domestic spending and take the regulatory chains off of industry, actions that could boost economic activity and create a better environment for investment.

Which one do people choose to bet on?

Here where I write, in Manitoba, we’re seeing a micro-example of the conflicting forces unleashed by changes on multiple political levels. Relief is spreading through our livestock industries as provincial regulatory impositions on barn siting and construction is allowing farmers to believe they could invest in new facilities at a cost that can be covered by future production. In other words, it might be possible to borrow millions of dollars, build a hog barn and have a reasonable expectation of profitability some time in the future. The new provincial premier, Progressive Conservative Brian Pallister, has been on an anti-“red tape” crusade for almost a year now, and that’s cheering the business community, including many farmers. Trump appears to be planning to do something similar.

Yet here in Manitoba, there’s also a chill over the same industries because of Trump’s apparent protectionist proclivities. Much of the hog industry, for example is built upon the reasonable expectation that the U.S. market will be open for sales of weanlings and market hogs. Especially with weanlings, access to the U.S. market is essential. If you’re thinking of investing in a new barn, you really want to know if the markets you’re planning to serve will actually be there.

The same applies to other Canadian and U.S. farm and food industries. The U.S. hog industry, for example, now relies upon huge exports in order to avoid flooding its domestic market. How would a trade war with, say, China affect that? It might be easier today, or soon, to build a new facility, but will farmers, food companies and other components of the agri-food industry feel confident enough to do it with so much uncertainty in the air?

That’s what we’ll have to live through the next couple of years to see. How will farmers react? Will they invest with confidence? Will they be scared and draw in their horns? There’s no way to know how “farmers” will react, because they’re all different. I’m guessing that some farmers who have been holding back for years on investing in new facilities because of excessive red tape will go ahead with their plans, while some who have just been musing about building new facilities or renewing old ones will hold back because there’s so much uncertainty in the air.

Do markets and investors truly hate uncertainty? We’re living through a period that is going to test that concept, because however things work out, there is no question we are living in a more uncertain time that at any other point in most of our memories.

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