Commentary

Rural Voice December 12, 2019

Trade deals don’t seem to come easy these days.  The US, Mexico, Canada trade deal (USMCA agreement) has finally been approved by the US House of Representatives.  This trade deal, which has been in the works for about 3 years, is a replacement for the 1994 NAFTA trade deal.  The deal was originally negotiated by President Trumps team, with the intention of ratifying it before the US elections for the House of representatives.  Nevertheless the trade deal wasn’t completed before these elections and the house went from Republican party control to Democratic party control.  Insisting on changes to the deal, the Democrats held up and delayed the trade deal ratification until early December, when they announced the deal would be approved.  This proclamation occurred on the same day that they released articles of impeachment against President Trump.  Once approved in the house the deal would then move on to the US senate for approval.  Ironically this time, the Republican controlled senate will hold up the deal, stating that they will not move forward with the proposed agreement while the US President is potentially impeached.   Due to the interworking (or lack thereof) in US politics the trade deal seems to have come full circle, only to be held up again.

Canada too seems to be potentially running into a similar issue politically.  The original deal was negotiated and agreed upon by the Trudeau government, back when the Liberals had a majority government.    Since much time has passed since this original agreement was formed, there may not be enough political support for it to be ratified here at home as well.  Since the election the Liberals lost their majority government and therefore need support from a minority party.  As of this writing the NDP leader has stated that they cannot support the deal as it stands, and I’ve yet to hear the position of the opposition conservative party.  Therefore ratification of the deal isn’t certain here at home either. 

There’s also the long drawn out trade dispute with China.  Currently the market chatter is one of progress toward a deal… but in the see saw of news on this front, if the past few years have been any indication, there is a good chance the news will swing towards no deal to end 2019.   Trade deals don’t seem to come easy these days!

China has been buying more US beans than once anticipated.  Recently China announced further tariff free waivers for 2 million more tonnes of US beans.  While this has increased the demand in the nearby time period, suspicions are that China buying from the US will shortly come to an end, trade deal or no trade deal.  Brazil will begin harvesting in February and expectations are for a record crop of over 121 million metric tonnes this growing season.  With Brazilian production estimates so high, once shipments begin it is likely that China will not have demand for US beans until September 2020.  That is unless, political pressures change the buying situation. 

Argentina continues to have its challenges politically too.  Because of the large price inflation and debt issues in Argentina there continues to be worry’s throughout Argentine producers that the newly elected government will introduce higher export taxes on agricultural products.  In a move to calm these fears a government representative has recently stated that the government will not unfairly target the ag sector as they want to see the ag sector grow, to inject more dollars into their economy.  Other debts issues are causing problems in Argentina too.  A large soy crush, Vincentin, is reported to have a cash crunch to the tune of $350 million dollars.  This crusher is a significant player in the Argentine market as they crush 500,000 metric tonnes of beans per month, or 6 million tonnes per year.

 

The December USDA report didn’t have anything that the farmer was looking for in its numbers.  This year harvest delays and light test weights are wide spread, not only here in Ontario but also across wide swaths of the US as well.  From this, many growers speculated that the USDA would start to drop US production, to account for harvest losses and low test weights.  You don’t have to look to far within the news to find evidence in some areas that would lead you to think along these lines.  A good example is the corn crop in North Dakota.  At this time, only about 43% of the North Dakotan crop is harvested and standability in some fields is horrible.  So the question remains as to where areas like this examples final production numbers will be.  It can’t be determined how much corn can be salvaged off poor standing fields or even if those acres will be harvested at all, especially in November when the USDA data was gathered for the December report.  That being said it may be the January 10th report, or possibly subsequent reports before we have a better handle on US corn production.  Also, keep in mind that while horrible production reports abound, like in North Dakota as we discussed, North Dakota only represents about 3% of the nations corn crop.