The U.S. food and agriculture sector would lose nearly $22 billion in exports, equal to 15% of this year’s sales forecast, if the U.S. scrapped NAFTA without a replacement on top of withdrawing from TPP, said three Purdue economists in a report on Monday. “Under this more pessimistic outcome, the negative trade impacts would be reflected in lower incomes for U.S. farmers, reduced land returns, and labor displacement.” President Trump threatened repeatedly to terminate NAFTA as a club to negotiate its successor with Canada and Mexico and again to force congressional approval of the new pact. Ratification of the United States-Mexico-Canada Agreement (USMCA) “is not a done deal,” said Dominique van der Mensbrugghe, one of the Purdue economists, at a Farm Foundation forum in Washington. The three economists estimated a $12 billion loss in annual ag exports if NAFTA is dissolved and the USMCA is not ratified, with pork, poultry, and dairy hit the hardest. An additional $9.8 billion in exports — half of it in oilseeds such as soybeans — would be lost due to tariff retaliation and to trade advantages given to U.S. competitors by the so-called TPP-11 countries that struck a free trade agreement after Trump exited. The losses would develop over a few years, said van der Mensbrugghe. By contrast, U.S. ag exports would grow by $454 million a year if USMCA is ratified and by $2.9 billion if the U.S. joined the TPP, said economists Maksym Chepeliev, Wallace Tyner, and van der Mensbrugghe.
U.S. Ambassador to China and former Iowa Governor Terry Branstad was in Iowa Monday along with Secretary of State Mike Pompeo. Branstad briefly introduced Pompeo at a gathering of farmers and agribusiness leaders held at the World Food Prize in Des Moines, Iowa. “The U.S.-China relationship is the most important bilateral relationship in the world. As President Trump has said, the United States seeks a constructive, results-oriented relationship with China, and, of course, the Secretary of State has a critical role to play in that relationship,” Branstad said to kick off the evening. Before turning over the podium to Pompeo, Branstad added, “During the seceretary’s most recent visit to China, I was impressed with his ability to connect and motivate our embassy staff and effectively articulate American interests to the Chinese leadership.” After Pompeo’s speech, Brandstad held a short press gathering and highlighted three big things he’s concerned with in China before moving on to answer other questions from the media.
“I am on the front line there in China. We have three big issues that we’re dealing with,” the ambassador told the media.
Farm markets traded in a narrow range today as investors await the upcoming USDA and CFTC reports. In the background it looks like investors might be finally showing some buying behavior in the soybean market. The most recent CFTC from two weeks ago showed how short funds are. Street estimates suggest that the odds are good the next CFTC Commitments of Traders Reports for release today and again on Friday will show even larger fund shorts. When there is a large fund short it is often an indication of a positive fundamentals on the horizon for the grain markets. When funds get heavy on the short, it almost always creates a short squeeze rally. The question at hand is when can this happen. It can be said that the corn market is trying to build a bullish narrative as well. If corn acreage doesn’t expand 3.0 million acres, that would leave it at 528 million bushels (mb) less production. Also, the USDA only projected 1.6 billion carryout in 2019-20. So, subtracting 528 mb leaves barely 1.0 billion bushels. Finally, add summer weather uncertainty, and we have the potential for a bullish market in corn. If a US/China agreement is hashed out and the Chinese purchases return we would have a full-on bull market in corn.