Farmers in the midst of the fall harvest season got a positive shot in the arm this week with news Monday that a revised North American trade deal had been struck that was largely seen as favorable to U.S. agriculture.
While trade tensions with China continue to escalate, the Trump Administration recently delivered some promising breakthroughs that include reauthorizing a trade agreement with South Korea, convincing Japan to come to the table for trade talks and — last but not least — announcing a renegotiated NAFTA deal that potentially opens new markets for U.S. producers.
“Our soybean harvest this year is large, and we are facing great uncertainty in China, so a modernized NAFTA is timely and beneficial for our farmers and rural communities,” summarized John Heisdorffer, a farmer from Iowa who currently serves as president of the American Soybean Association.
Under NAFTA, U.S. soy exports to Canada and Mexico were almost $3 billion in 2017, with exports to Mexico alone growing four-fold since the agreement began. Mexico is now the second largest export market for U.S. soybeans and meal.
The eleventh hour agreement with Canada was considered especially advantageous for the dairy, wheat and poultry sectors. But the news was good enough overall to lift sagging grain prices, at least in the short term.
“No trade agreement has had more impact on the feed grain sector than NAFTA, which prompted explosive growth in our export sales to both countries as well as the development of a fully-integrated grains and livestock supply chain within North America,” noted U.S. Grains Council chairman Jim Stitzlein, manager of market development for Consolidated Grain and Barge, which operates several grain handling facilities in Western Oklahoma and the Texas panhandle.
According to the latest estimate from USDA, this year’s soybean production is projected to reach a record 4.6 billion bushels, on average yields of 52.8 bushels per acre nationwide, also a new record.
Corn production nationally is also near record highs, with ending stocks of both corn and soybeans rising.
Another fall-harvested crop that has been caught in the crosshairs of trade disruption, particularly with China, is grain sorghum.
After the trade dispute erupted earlier this year, soybeans and grain sorghum both lost more than 20 percent of their value.
To put it in perspective, China bought two-thirds of last year’s entire U.S. sorghum crop.
USDA’s trade aid payments, designed to compensate farmers for losses caused by recent trade upheaval, are based on calculations that peg the harm to soybean prices at $1.65 per bushel, compared to 86 cents per bushel for sorghum, 6 cents per pound for cotton and a penny per bushel for corn.
Jordan Shearer, a farmer who also serves as executive director of the Colorado Sorghum Association, said growers needed a shot of good news on the trade front.
“The idea when this started is that there would be some short term pain but we would all come out better on the other side,” he said. “I think that could be true for the national economy as a whole, but as far as agriculture is concerned, I don’t know if that’s where we’ll end up. Maybe I’m wrong, and I hope I am.”
“I think a lot of people are hopeful,” he added. “Nobody disputes China’s been nefarious in some of the things they do. But there’s always been this question about whether this strategy is going to provide anything positive for us in the end.”
Sorghum acreage has been holding steady with production expected to be up about 3.5 percent this year, according to the latest USDA crop estimate.
“Western Kansas is going to raise a bumper crop of sorghum,” Shearer observed. “There’s some pretty good sorghum in southeastern Colorado, back into Prowers and the southern end of Kiowa County. But the rains have been spotty and with that they’ve had a lot of hail. Around Lamar it looks good, but north and west of there it’s been drier.”
Out of five Colorado State University sorghum variety trials, three were hailed out and a fourth one at Walsh had such poor stand establishment it had to be abandoned, leaving only a single trial at Akron this year. The soil moisture profile there started out good but conditions have been drier than normal in that location ever since, Shearer said.
On his own farm near the eastern edge of the Oklahoma panhandle, Shearer recently finished planting wheat. In a couple more weeks, he’ll be harvesting sorghum and a few weeks after that, cotton.
“We planted cotton for first time ever this year, and that’s something I never thought I’d do,” he said. “Our wheat acres have declined significantly. At least with a summer crop you have more upside potential if the rains come.”
Shearer noted the uncertainty surrounding trade is one of many factors that have been weighing on farmers.
Other concerns are high input costs coupled with low commodity prices, rising interest rates, tougher banking regulations and the inability of Congress to come to an agreement on a new farm bill. The old one expired on September 30.
The hope now is that legislators will find a way to finalize a new farm bill package during the lame duck session that follows the mid-term elections.
“There’s a lot of headwinds we’re facing right now,” Shearer said.
Rodney Jones, formerly an agricultural economist with Kansas State University and now on the faculty at Oklahoma State, agreed the new NAFTA deal — renamed the U.S.-Mexico-Canada Agreement, or USMCA — was a sign of progress that appeared just at the right time.
“For the most part, the agriculture community is willing to take a little pain, but there’s a limit to how long before we see some evidence that the strategy is being effective,” he said. “We have seen some positive movement now, and time will tell whether we get everything worked out with all the big players.”
“I still believe there are a lot of people placing more of the price blame on the trade war than is warranted,” he continued. “A lot of it is just the fact that we’ve raised another record corn and soybean crop, and we’ve got massive supplies. Pretty much all of our crop prices are down, so it’s a very tough economic environment.”
“My message is pretty much the same as what I’ve always said,” he concluded. “Be a low cost producer, manage your business well, and don’t spend too much time worrying about things you can’t do anything about.”