Ag’s Safety Net

As I watched the long awaited signing of the Phase 1 US/China trade deal in the East Room of the White House, my mind went back to a day about 20 years ago. That day I was sitting in that same room watching then President Clinton talk about the need for granting most favored trade status for China. Fast forward 20 years and we’re still talking about the importance of trade with China. Despite all the talk about farm bills and crop insurance being our ag safety net, as important as they are, our real ag safety net is China. Like Russia 40 years ago, China is the market mover that has the most impact on our ag economy. That’s why states and ag groups have for years sent trade delegations to China and roll out the red carpet for every Chinese delegation that comes here. Last year when Mother Nature gave us a natural set a side program, idling millions of acres, the markets didn’t go wild because we were in a trade war with China. MFP payments were made because of the trade dispute with China. There is now a huge protein demand opportunity because of African Swine Fever in China. The reality is, that while not impossible, it is extremely difficult for our ag economy to do well without China buying a significant amount of our production. Other markets are needed but they can’t match the sheer numbers of China. It’s important to remember that this deal doesn’t solve all problems. Both countries, politically, will spin it to their own benefit. However it will take time to truly judge just how good this deal is. Tariffs are still in play and China’s track record for compliance is not very good. Enforcement will be key as we move forward. The impact of this trade war will be felt for decades and more disputes will no doubt take place but it’s much better when the world’s two biggest economies are trading and not fighting. In sports there is an old saying that the best trade deals are the ones where both sides do well. Hopefully that proves to be the case here otherwise our ag safety net will once again have a big hole in it.