Farmers Don't Believe Trump's Trade Promises?

From Chris Clayton's report on the recent American Farm Bureau convention's policy recommendations:

"Still, Farm Bureau members voted to keep language in the policy book supportive of MFP payments even with President Donald Trump touting trade wins in China and the congressional approval of the U.S.-Mexico-Canada Agreement (USMCA). 

"Our members are basically saying 'Show us results'," said Scott VanderWal, a South Dakota farmer and AFBF's national vice president. "We're very, very happy the president has the China phase-one agreement in place, USMCA in place and will be signed very soon, but no products have moved, implementation hasn't happened yet, and it's kind of a 'prove it to me' thing. When we get down the road, there is nothing we would like better than to really see these agreements kick in and show us some expanded market opportunities, and hopefully the markets will come back with that to where we can go back to making all of our income off the market rather than having the government make up for those trade disputes and the damage to the market that has been done."

Soybeans and the Trade War

From an ERS report on the soybean trade among Brazil, China, and the US.

https://farmpolicynews.illinois.edu/2019/06/ers-report-interdependence-of-china-united-states-and-brazil-in-soybean-trade/

MFP II Addenda

Via Farm Policy News further details on MFP II--based on the USDA big shots' discussion.  The key point I take from it:

"Referring to the market facilitation program, Undersecretary Northey indicated that, “So these payments are not designed to be a market loss payment. They are a market facilitation payment. It’s not going to perfectly reflect what some producers feel the loss of these markets have been.”

FWIW I don't know what the words "market facilitation" mean, at least not as applied to the $14.5 billion part of the program. 

MFP II Announced

NY Times writes about trade policy and Trump's trade war, including the announcement of $16 billion in MFP II.

Chris Clayton's article at DTN  has the details on the program, which has three tranches and uses county payment rates among other differences from MFP I.  He also notes Trump's lie about the history of farm income:

"President Trump reiterated, falsely, that farmers have seen a 20-year steady decline of income, despite farm income peaking in 2013. As a key part of the president's rural base, Trump reiterated, "They [farmers] are patriots. They stood up and they were with me. They didn't say 'Oh we shouldn't do this because we're going to have a bad year. They have had 20 bad years if you really look."

The county payment rate will be new and a challenge to implement. [Update: When I wrote this, I was wrong.  I was thinking county/crop payment rates, which I never dealt with back in the day, but the fact is FSA has had experience with them, both through price supports and the new 21st century programs which I don't understand.  However, the idea is one country price for all crop acreage, regardless of the crop planted.  That, I think,  raises new problems.  If all farmers in the county raise crops in the same proportion, it could work.  But that's a big "if".  Say a country produces corn and soybeans 50/50, so the county rate is based on that proportion. But take a farmer who plants only corn, which I'm assuming is less affected by the trade war, she will get a higher rate than she "deserves".  Conversely the farmer who plants only soybeans will be screwed.  (Obviously I'm using extreme examples.)]

A New Market Facilitation Program?

Lots of talk about a new and bigger program to compensate for depressed prices due to Trump's trade war with China.

Will it just be the MFP for 2018 updated for 2019?  Maybe, maybe not.  There's talk of including prevented planting because of the widespread flooding and the very slow progress of corn planting.  We'll see.

[Updated--see Clayton's piece.]

Canada and Supply Management for Dairy

One of the biggest issues in the renegotiation of NAFTA with Canada is their desire to maintain their system of supply management for dairy.  Here's a site with statistical data on the industry.  The two big provinces are Ontario and Quebec.  As one can see from this chart there's little variation in cow numbers over the last 15 years (2004-2018).  But if you look at the number of farms, there has been roughly 1/3 reduction in farm numbers over the same period (17,000 to 11,000).

From ERS  (the copy and paste process loses the formating.  I've bolded the two big points): Midpoints increased for each commodity over 1987-2012, but the rate of increase varies widely, with dramatic long-term changes in egg, hog, and dairy production (table 9). The midpoint flock size in egg layers increased to 925,975 birds in 2012 from 117,839 in 1987 (and just over 62,000 in 1982); the midpoint for hog removals rose to 40,000 in 2012 from 1,200 in 1987; and the midpoint dairy cow herd rose to 900 cows in 2012 from 80 in 1987. The broiler and fed cattle industries show continued consolidation, with 2012 midpoints a bit more than double their values in 1987. However, each underwent striking changes in organization and technology well before the series starts in 1987 (MacDonald and McBride, 2009). Table 9 Consolidation in livestock sectors, 1987-2012 Commodity 1987 1997 2007 2012 Change (percent) 1987-2012 2007-2012 Sales midpoint: Number of head sold or removed Broilers 300,000 480,000 681,600 680,000 127 -0.1 Fed cattle 17,532 38,000 35,000 38,369 119 10 Hogs and pigs 1,200 11,000 30,000 40,000 3,233 33 Turkeys 120,000 137,246 157,000 160,000 33 2 Inventory midpoint: Number of head in herd/flock Beef cows 89 100 110 110 24 0 Egg layers 117,839 300,000 872,500 925,975 686 6 Milk cows 80 140 570 900 1,025 58 Source: USDA, Economic Research Service, compiled from census of agriculture data.

Bottom line: while Canadian dairy farms have declined in number, the rate of decline in the US is higher. 

I'm reminded of the supply management system the US used to have for tobacco, now ended.  It had a similar effect: slowing the transformation of the industry.

Don't Tick Off the Farmers: NAFTA

Politico has an article on ag organizations concerns over the Trump's administrations NAFTA renegotiation trade strategy.  I've thought in the past that the drop in commodity prices over the last few years, a big drop from their peaks around 2012, played a role in switching votes from Obama to Trump.  If ag fears come true, will be another headwind for Republicans in 2018.

Trade Is NOT Simple: Vietnam Spinning for China

Lyman Stone tweets, but has a day job, which includes this piece on cotton exports to Vietnam, which are part of a complex web of relationships among cotton-producing country, yarn spinning countries, yarn consuming countries (i.e. China) and multilateral trade agreements. 

Some curious facts:

• spinning yarn and weaving cloth don't necessarily occur in the same country--I wonder why--the one is simpler than the other and easier to outsource? 
• US cotton shipped in bales across the wide Pacific is competitive with cotton grown in India. Our growers are currently more efficient than Indian, so able to handle transport costs?
• China used to have reserves of cotton but are now reducing or eliminating them. Wonder why--moving to less government intervention, if so, why?

Stone's summary paragraph: "If duty-free access for yarn is driving increased spinning in Vietnam, then the China-ASEAN Free Trade Agreement could be pushing U.S. cotton exports higher.  Yarn spinning being shifted from producer-countries like India, Pakistan, Uzbekistan, and to some extent China, into duty-preferred importer countries like Vietnam bodes well for U.S. exports.  Because the China-ASEAN Free Trade Agreement does not require that raw cotton inputs be sourced within the area, U.S. exporters are able to derive an indirect benefit from China’s duty-free ASEAN access."

We're Bloodsuckers, Not Farmers?

From Chris Blattman, I think, the Harvard Atlas of Economic Complexity, which purports to show the imports and exports of countries around the world.  I say "purports" because I don't really understand it, except the link gives a graphic showing US exports by category in 2010.  Major items are labeled, so "soybeans" is a nice gold block with ".87%" in its corner, which I assume means soybean exports accounts for that much of total exports.  Fine and dandy.  I get the idea.

But wait, down in the left hand corner there's this pinkish purple block which is labeled "Human or animal blood" and it's got "1%" in its corner.

Is Harvard really trying to tell me that we suck that much blood out of ourselves and our animals to ship off to whom? Blood is more valuable than soybeans?  Where are the world's vampires who are importing that blood?  Someone needs to get on this story, which has been totally unreported until now.

US the Free Trader

Sometimes we think the US uses tariffs on agricultural products unfairly.  Here's a comparison worldwide.

Chopsticks to China

Via Freakonomics, here's an article on an entrepreneur who's making and shipping chopsticks to China from Georgia--turns out we've got cheaper wood than they do.

I must say, when we spent our honeymoon in Britain many years ago, I was struck by the difference in traveling from London to York and from DC to New York.  Miles and miles of trees and unused land in the US; not so much in Britain.

Black, Black Clouds for Cotton

Via Chris Clayton, a link to a review of the prospects for cotton in the future farm bill.  Basically it's bad for cotton if the Republicans take Congress but also bad if the Democrats retain control, because Collin Peterson likes crop insurance and not marketing loans, while the cotton people like loans and not crop insurance.

As I'm in a sadistic mood today, I enjoyed a good laugh at their predicament.

A Dem like me finds a bit of solace in their support for the South Korean trade pact and support for regulation of derivatives in the financial regulation law just passed.

French Drugs

From Dirk Beauregarde:  "Talking of drugs, last France exported 7.1 billion Euros of the legal kind. The French pharmaceutical industry is very healthy"  That triggered my curiosity.  According to Nationmaster, the US is the leader in drug exports ($8 billion) just ahead of Germany, Switzerland (both about $7 billion), Belgium and France (although France's total is much less than Dirk's figure, but there likely are differences in definitions.

ACRE Confuses Even the EU

From the DTN blog citing an EU assessment of ACRE:

"Heralded as an innovative new risk management tool, ACRE is yet another countercyclical scheme, this time for revenue," the report highlights. "So it is business as usual in that the countercyclical nature of US farm support continues, with a bewildering array of schemes all addressing the same issues. For many observers it represents a significant step backwards in terms of agricultural policy."

See also Keith Good's FarmPolicy which puts this assessment in the broader context of challenges to free trade.

The Power of Neighborhood

The NY Times has an article on the impact of high fuel costs on globalization. Manufacturing and not agriculture is the focus, there's only a couple paragraphs on food) but the same economics are at play. (There is a reference to the end of avocado salad in Minnesota in the winter--apparently a doomed species.)

I think I'd take it with a pinch of salt--transportation costs probably aren't the most important cost factor in most productive activities--but as we're reminded, evolution works using marginal differences. There may be more prestige and class differences. After all, the spice trade from the East Indies encountered high transportation costs but still found markets in Europe.