This Week In Ag #91

There’s a new sheriff in town. Or at least an old one returning. And there’s new leadership in Congress. So how will the election results impact agriculture?

• It starts with a new boss. In his last term, Trump chose Georgian Sonny Perdue to lead USDA. I had the pleasure to meet and spend time with Secretary Perdue during his time in office. I once asked him, “what do you want your legacy to be?” His response: “He said what he’d do, and he did what he said.” That candor is what made him widely popular with farmers, even though he was often put in the challenging position of defending tense trade relations with China. It’s a fair bet that the new ag chief will not be a life-long politician or bureaucrat, but like Sonny, an actual farmer. Here are some names to consider: Indiana mega-farmer Kip Tom, outgoing North Dakota Governor Doug Burgum (he was on the VP short list and will end up somewhere in the Cabinet), vocal Trump supporter and South Dakota Governor/rancher Kristy Noem, Farm Bureau President Zippy Duvall, Texas rancher/ag commissioner Sid Miller and the politically connected Ted McKinney of Indiana (I know Ted and his family from my days at Purdue and Prairie Farmer).

• Trade relations are weighing on the minds of many producers, especially when it comes to China. That’s understandable, given what transpired during Trump’s previous term. Consider this: one out of every three rows of soybeans we grow goes to China. From pecans to pork, China is the USA’s top export destination for food products. Trump has floated the use of tariffs on Chinese-produced goods. How would China retaliate? Brazil has overtaken the USA as China’s leading trade partner for ag products. But the American consumer has been awfully good to the Chinese. Perhaps too good. And for the world’s most populous country, food is always in high demand. Sino-American relations are always complex, with several major issues at play. While farm country solidly backed Trump last week, there’s no denying their concerns over trade. How this tricky relationship gets navigated may have a huge impact on the ag sector.

• Farm subsidies played a big role in compensating farmers during last term’s Chinese trade tensions, accounting for over 20% of farm income in 2019. Government payments rose to 50% of farm income in 2020, due to Covid. So there’s precedent for a Trump administration supporting farmers in times of need.

• What will become of climate-smart agriculture? Clearly, any whispers of renewing cap-and-trade-style policies have been silenced. Climate alarmists will no longer have a seat at the table. The 2022 Inflation Reduction Act did make several promising provisions for corn and soybeans, especially when it comes to biofuels. These were made in the name of climate mitigation. Yet many believe home-grown fuels, like food, leads to stronger national security. History shows that if there’s one bi-partisan issue in Congress, it’s biofuels, especially among Midwest legislators. The GHG-reducing, sustainably grown food and fiber movement is largely driven by private industry. CEO’s of big food brands have made pledges, and sustainability driven investors will remain influential. Perhaps the narrative may shift slightly from climate-action and back to stewardship. Regardless of the story line, it’s hard to imagine we’ll see a de-emphasis on supporting sound soil practices, such as cover cropping, reducing tillage and enhanced efficiency fertilizer usage.

• Robert Kennedy Jr. will play a prominent role in the new administration. He’s been an outspoken critic of the current food system, citing the failing health of Americans. “And then also the USDA,” Kennedy recently remarked, “which, you know, is key to making America healthy because we’ve got to get off of seed oils and we’ve got to get off of pesticide-intensive agriculture.” He could spell a disruption within the current food system. While he may sound radical to some, his argument is not without merit. As a country, we spend $1.7 trillion on food, and $1.9 trillion health care, much of which is spent to fix poor nutrition.

• Border security and deportation has been a centerpiece of Trump’s campaign. How will it impact farm operators, especially those in the west, who rely on migrant workers? Reports indicate that nearly 45% of America’s 2.1 million work workers are undocumented. Trump did advocate the H2A program during his last term, which allows visa holders to come to the U.S. for seasonal farm work. That program has now grown to over 370,000.

• Look for less regulation and government overreach on all businesses. Government agencies are clearly at risk of major overhauls, USDA and EPA included.

• The economy ranked as the most important issue in the election. Grocery prices, which soared 22% over the past four years, were a key contributor. Under Trump 45, both inflation and interest rates remained low. Based on election results, voters are hopeful of returning to a pre-Covid economy where they have more buying power. So are farmers. Cattlemen want consumers to buy more ribeyes. Vegetable growers want consumers to buy more fresh produce. Almond and pistachio growers want more snack trays stuffed with their flavorful nuts. By last week’s end, the Dow shot up to a record 44,000, on the speculation of lower corporate taxes and renewed consumer confidence.

•    With the election behind us, a new Farm Bill is ahead of us. The shift in leadership, spurred by an overwhelming support from rural Americans, should be reason for optimism.