Certainty is better than uncertainty for agricultural trade, a Washington State University economics professor says.
“It would almost be better just to say, ‘We’re going to impose a bunch of tariffs, there’ll be retaliatory tariffs and they’re all permanent,’” small grains economist Randy Fortenbery told the Capital Press. “That almost would be easier to respond to than going back and forth, continually changing who’s affected, the extent they’re being affected and which commodities are being addressed.”
Fortenbery is still reading through the new agreement between the U.S., Canada and Mexico.
“What’s good for ag is we resolved the conflict, and so we can go back to the way we interacted with each other prior to 2018,” he said. “For grains, it looks like it’s back to business as usual, and that’s positive for us.”
While the U.S. seems to have come to terms with U.S. and Mexico, it remains to be seen if lost wheat sales to Mexico can be recaptured, Fortenbery said.
“Once you lose a market ... you don’t necessarily get that back because they’ve already sourced other suppliers,” he said.
Wheat prices were up following the agreement, but then dropped 25 cents, which Fortenbery said is to be expected after a big increase. Soft white wheat is $6 per bushel to $6.17 per bushel on the Portland market.
In other observations:
• Grain markets: The market doesn’t appear to be overly concerned about the expired Farm Bill, he added.
“My guess is that trade is really dominating expectations going forward,” Fortenbery said.
The corn harvest outlook will impact wheat prices, he said.
The value of the dollar is gaining strength, making the U.S. less competitive on the international market. Global wheat stocks might not grow, but if all countries have good production, Fortenbery doesn’t expect a large increase in wheat prices.
• Downturn possible? The New York Post in September published an article indicating a forthcoming economic downturn, saying it could be “worse than the Great Depression.”
Fortenbery said that’s an extreme forecast. A recession is possible, he said, but he said he’s not quite as pessimistic. The predictions are accurate about high personal debts and reduced legislation to regulate banks, derivative markets and other investment instruments following the downturn in 2007-2008.
“We are maybe not as vigilant as we thought we should be right after the last downturn,” Fortenbery said. “I do think it’s better in terms of ensuring banks are lending responsibly and debt isn’t being taken on by people who can’t afford or aren’t in a position to service that debt.”
Inflation and higher interest rates would make carrying debt in agriculture even more difficult, Fortenbery said.
But back in 2008, just as the general economy was collapsing, commodity prices went to some of the highest ever, he noted.
“It’s not always true that every sector goes through the same experience,” Fortenbery said. “I’m less concerned about a depression and more concerned about the uncertainty around trade.”