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Riley Dormaier (2 1/2) waits for his turn on the combine during Dormaier Family Farms 2020 harvest
near Hartline.

Photo by Robin Dormaier



Talking Trade

Convention presentations repeatedly return to world commerce

December 2019
By Trista Crossley

What do you get when you add a dash of farm bill implementation and trade to a new global order, served with a side of national wheat issues and topped off with a long-term weather forecast? An informative, engaging 2019 convention agenda, of course.

National organizations focus on trade as top issue

Agri-Pulse Executive Editor Philip Brasher is no stranger to national food and agricultural policy, having covered those issues for more than 15 years. He moderated a national organization panel featuring Darren Padget, vice chairman of U.S. Wheat Associates (USW); Scott Brown, representing the National Barley Growers Association (NBGA); Dave Milligan, vice president of the National Association of Wheat Growers (NAWG); and Jerry Brown, a member of the board of directors for the Wheat Foods Council (WFC).

Trade and trade-related issues dominated the panel’s discussion, with Brasher jumping right into the confusing swirl of news around China, saying there are indications that negotiations are moving along. Statements have been made by Trump officials that China has promised to buy up to $50 billion in U.S. commodities, nearly twice the amount they were purchasing before the trade war began. No other details have been released.

“That’s obviously the biggest single issue that I know all of you are waiting for, some sort of commitment for significant purchases by China,” Brasher said.

Brasher also touched on the U.S.-Mexico-Canada Agreement (USMCA). House Democrats continue to meet with U.S. Trade Representative Robert Lighthizer to work out differences so the bill can move forward. He said that once the administration submits the formal implementing bill to Congress, “…you will see this thing move.” He explained that they already have the votes to pass it, and Speaker of the House Nancy Pelosi (D-Calif.) is getting pressure from rural Democrats (“There aren’t that many, but there are some”) to take action on the bill.

Brasher also talked about a different trade-related issue, biotechnology, saying it’s a significant concern in wheat because export markets have generally been resistant to accepting genetically engineered (GE) varieties. He said another issue agriculture loves to hate may have a potential influence on attitudes against GE varieties, namely climate change. He postulated that gene editing may be able to produce wheat varieties that are more resilient to a changing climate. The U.S. Department of Agriculture (USDA) is scheduled to propose rules that would streamline regulation of gene-edited traits in June, but Brasher noted two major issues with the proposed regulations:

• The regulations would allow companies to determine themselves if the traits should be subject to regulation, and

• There’s no requirement that companies notify the industry that these products are going to market.

“As you can imagine, there’s lots of concern about that in the ag sector as well as the food sector and elsewhere,” Brasher said, adding that exporters in particular have to know what biotech traits may be in their shipments.

Brasher than asked panel members to introduce themselves and their organizations. He then asked several questions, ending the discussion by asking each panel member what issue they are most optimistic about or worried about:

USW. “Trade” was Padget’s answer to the questions of what he was most concerned about and what he was most optimistic about, explaining that there are things getting done in trade, and that there are “some victories” out there, such as the bilateral with Japan, and recent news that Brazil has agreed to implement a duty-free tariff quota for U.S. wheat, which will give Midwest producers a boost. “If you think things are bad here, it’s not pleasant there,” he said. “Wheat off the market is off the market. It doesn’t matter what color or what class it is, that’s a good thing.”

NAWG. Milligan pointed to the influence social media has on the public’s perception of agriculture, and how sound science has taken a back seat to that. He said he has lots of faith in what the American farmer can do; they just need to get the message out there. Milligan also talked about damaging the Chinese market for U.S. wheat and wondered what the long-term effects of disrupting that market might be.

NBGA. Mexico is an important market for U.S. barley, so getting USMCA across the finish line is an important issue for the NBGA, Brown said. He also touched on the Market Facilitation Program (MFP), saying the association has expressed displeasure with the way funds were allocated. He said he was most concerned about keeping Americans and the world educated on where food comes from. “We have to speak out and lobby for our policies and our way of life. There are so few of us anymore, that’s the challenge. We can’t be a silent minority,” he said.

WFC. Brown explained his organization is dedicated to increasing the consumption of wheat-based foods, and they’ve seen research that shows talk about low-carb and gluten-free diets trending lower. The WFC has recently updated their website and is focusing on partnering with the personal trainer industry as a way to influence a wider audience.

USDA’s Censky touches on china, USMCA, farm bill implementation

While USDA Deputy Secretary Stephen Censky touched on multiple topics during his convention presentation, he focused much of his time on trade, especially China, Japan and the USMCA.

“I know how important trade is to the success of American agriculture,” he said. “On average, about 20 percent of net farm income comes from trade. Here in the Pacific Northwest, it’s much, much higher than that. I know how active this whole region has been in caring for and nurturing and developing those export markets over time.”

He called the potential trade deal with China “good news,” and said the administration is close to having a phase one deal, which has some really positive aspects for agriculture.

“We are working hard to finalize that agreement and hope to announce it in the very near future,” he said.

Censky said for agriculture, the USMCA has all the advantages of the original NAFTA (North American Free Trade Agreement) plus some benefits, like greater market access in Canada for dairy, as well as a revision to Canada’s wheat policy that stops Canada from automatically downgrading U.S. wheat to feed quality.

“Your organizations have been very strong in pushing Congress to pass USMCA. Thank you, and please keep the pressure on as well. We need to have it pass. We need it done this year so we can lock in those gains and move on to other trade agreements,” he said. “We are working to develop other market opportunities around the world…We are leaving no rock unturned to see how we can export more of our products overseas.”

The day before he spoke, Censky flew into Pullman and visited the Agricultural Research Service’s (ARS) research and breeding facilities at Washington State University. He said one of the points that was stressed to him was how successful the cooperative relationship between WSU, ARS and the region’s industry groups is.

Censky also touched briefly on implementation of the 2018 Farm Bill, saying USDA was very pleased with its progress. The agency is moving forward with the rural development part of the farm bill, including working on rural housing, community facility loans and rural broadband, where the USDA is investing $1 billion in grants and loans to build broadband and internet connections in rural areas.

End of world order should bring opportunities to American growers

When Peter Zeihan sees a map of the world, he sees it just a bit differently. Most people see continents, countries and oceans. Zeihan sees the political, economic and strategic currents that keep the global economy humming. During his convention keynote presentation, he explained how it’s all going to break down and why.

He started by laying the stage for the current world order, which began after WWII, when the U.S. brought its allies together and promised to patrol the global oceans so, as Zeihan put it, “…anyone can go anywhere at any time, purchase any raw commodity, ship it home safely, metabolize it into a finished good and then export it.” In return, the U.S. expected them to be on our side against the Soviet Union. That worked well, until the Berlin Wall fell. Suddenly, the global order the U.S. created to fight the Soviets no longer served American strategic needs. A “bribe” Zeihan called it, adding that when you no longer need anything from a bribe, you stop paying, and that’s exactly what the U.S. is doing.

If America is stepping back, can anyone replace the U.S. as the sole super power? According to Zeihan, they will need to do two things: They need to provide security on the seas, where something like 95 percent of international trade happens, and consumption. He explained that the combined navies of the world might equal American naval fire power in a century or more at current levels of global naval build out.

“As an American, I won’t lose a lot of sleep over this. There’s no country, there’s no coalition of countries that could even theoretically displace the U.S. this century,” he said.

The other piece is consumption, because ultimately, trade doesn’t work without a buyer. Zeihan tied consumption to demographics, saying most countries’ birth rates are slowing and their populations are growing older. A younger population generally means more spending (think raising a family, buying a car). Thanks to the millennials, in the next decade, the average American will be younger than almost everyone else among advanced nations.

Zeihan also took a look at how the U.S. is interacting with other countries, using energy, steel/aluminum and auto tariffs and the dollar to get favorable trade terms. He took apart some of the recent trade deals with South Korea, Mexico, Canada and Japan to explain how the U.S. was able to use those tools to push the other side to the negotiating table. In nearly every case, agriculture was the sector that was given the most access. He also touched on China, saying we are in the final years of China because of its geography. China is surrounded by island nations that can block their access to the rest of the world. Zeihan said the only reason China is flourishing is because the U.S. has forced everybody to be on the same side.

“All the U.S. has to do to destroy China as an entity is to go home. That we can handle,” he said.

Zeihan said most of the U.S. economy is immune to what happens abroad, except for Silicon Valley and agriculture. Technology manufacturing is mostly done overseas, and China isn’t targeting that sector because it will hurt them as much as the U.S., so instead, they’ve gone after agriculture.

“Bottom line, you are just too damn good at what you do,” he explained. “Out of every four calories the average American farmer produces, one of those calories has to be exported. That is where our weakness is in trade talks. It’s the only sector where there’s really exposure, so it’s the sector everybody goes after. I can guarantee that on the backside of this, when the global order is gone, we will see collapses in agriculture output around the world, collapses that won’t hit you at all.”

Expanding on agriculture, Zeihan said that thanks to U.S. assistance and security, any country that has questionable and marginal land has been able to grow wheat. He explained that the U.S. used economic means in order to achieve a security goal, and now that that security goal has been achieved, the U.S. is breaking away from the system.

“We changed the way the world works. We provided the inputs, the finances, the market and the security to allow everyone to expand. They’ve been able to expand their agriculture systems under this environment to get a degree of food security. None of this is sustainable. You have been living in an environment almost custom designed to cause you problems,” he said, adding that the U.S. withdrawal will be an unmitigated disaster for most of the globe. “That means between trade talks and the end of the order, the pendulum is shifting back to you.”

Two other factors will play into this scenario where the U.S. is mainly insulated from the collapse of the world order, Zeihan said. Many countries are either still recovering from a recession or are overdue for a financial correction.

Next, Zeihan turned to energy. He had a night-time satellite picture that showed a large cluster of lights in western North Dakota where there shouldn’t be any lights. He explained that those lights are the result of excess natural gas being burned off the oil fields as a waste product. He explained that the U.S. has retooled many of its systems to use natural gas instead of crude oil to take advantage of this huge supply, including fertilizer and herbicides. Very few other countries have the resources to do this.

“That means inputs you use for every product you produce are going to be stable,” he said. “In this environment, very, very few countries can play. If it’s not a transport risk, it’s a security risk. If it’s not a security risk, it’s an energy risk. If it’s not an energy risk, it’s an input risk. If it’s not an input risk, it’s a financial risk.”

Finally, Zeihan took a quick look at the markets of the future. Mexico, Columbia, Vietnam, Myanmar and Indonesia top the list for him with U.S. competition mostly coming from Australia.