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U.S. agricultural trade threatened by Trump talk

Profit Matters 3-28-17

Agriculture in the United States has moved toward foreign trade since the early 1970’s.

My long career started just as the Soviet Union announced it would buy corn and wheat from the United States.

The boom in buying brought on the highest net prices for grain ever established during the period from 1972 to 1980.

Then, the world supply started to grow and the United States realized it had to be a competitive seller.

Now, over 40 years later, we are one of the most competitive nations in exports of agricultural products.

Some countries can beat us on smaller quantities of butter and specialty items and Brazil and Argentina are challenging us on Corn and Soybeans, but we are an international powerhouse on producing huge quantities of high quality agricultural products, and selling them worldwide.

Enter the Trump Administration with the campaign promise of scrapping all multilateral trade treaties and renegotiating them.

The president may find, like reforming Obamacare, that the old system works better than what he wants to put in place, but the challenge of trade is perception as much as reality.

A news story out yesterday indicates that Mexico is Considering duty-free corn trade with Brazil and Argentina.

Mexico is the world’s biggest buyer of U.S. corn, and the potential move by Mexico is seen as a shift away from American imports, according to the DTN story.

An eagerness to renegotiate the North American Free Trade Agreement by President Donald Trump has corn buyers in Mexico concerned and exploring other options.

Trump has called NAFTA unfair to the U.S. and has vowed to renegotiate the deal or walk away.

Mexico currently imports 98 percent of its corn from the U.S. and total U.S. farm sales to Mexico were worth an estimated $17.7 billion last year, five times greater than when NAFTA came into force.

The U.S. Department of Agriculture says corn imports by Mexico from the U.S. were worth $2.3 billion in 2015.

Now we place in the mix a new Secretary of Agriculture, Sonny Purdue.

Although not yet confirmed by the full Senate, Purdue is known for his “free trade” attitude.

Perdue got good marks for his answers on key issues, like trade, at last week’s confirmation hearing.

“Farmers are really struggling to profitably hold on and many times even the best farmers are not able to produce a product with the best production capabilities they may have. I think trade is really the answer,” Purdue explained. “I look forward to being an adviser and counseling this administration specifically about the benefit that we have of farm products to sell around the world.”

So U.S. Agriculture is caught on the horns of a dilemma.

We have bountiful supplies of all types of agricultural products ready to export at low prices, but the words of the president are causing trading partners to find other sources just because he is talking about renegotiating trade agreements.