This new year could be the most important year for US agricultural trade policy since at least the mid-1990s, said Purdue University Agricultural Economist Russell Hillberry, in a 2020 outlook paper.
It is difficult to know what the future holds for agricultural trade as much depends on the outcome of the presidential election and how the election affects politicians’ behavior, Hillberry said. Trade policy should dominate domestic and export market developments.
In his outlook Hillberry said President Trump’s efforts to depart from a rules-based international trading system that has served US agriculture well may be more important than the US/China trade deal or the US-Mexico-Canada trade Agreement.
The international trading system, including the World Trade Organization and regional trade agreements that are WTO-compliant, was built over almost 70 years and has served US Agriculture well over the last 20, Hillberry said. A breakdown of the rules-based international system, thus, is a huge risk for US agriculture.
USDA FORECAST
The USDA’s November forecast for 2020 agricultural exports was $139 billion, up $2 billion from the August forecast, he said. Rising soybean prices added $1.2 billion in forecast exports, while increased demand for pork in China contributed to an increase of $400 million in predicted pork exports.
Falling beef prices reduced the value of expected beef exports by $200 million, Hillberry said. Exports to China in 2020 were forecast to total $11 billion, up $3.5 billion from the value expected in August.
Ongoing negotiations with China should garner the most news attention this year, as they did last year. In this regard, the president does not have much leverage, he said. He is up for re-election and needs the Phase 1 deal to be signed to curry the favor of rural voters, even though it won’t undo the damage done by the trade war.
China’s inadequate enforcement of international rules on intellectual property will be difficult to resolve within the next year.
ALTERNATIVE MARKETS UNDERCUT NEGOTIATING LEVERAGE
The existence of other markets around the world limits the leverage the US has in any go-it-alone trade war, which is one reason previous presidents employed trade policy strategies that involved international institutions and/or coalitions of like-minded governments, Hillberry said.
Exporting and many importing Chinese companies have not had to suffer the loss of markets the way US companies have, he said. Many exporters were able to sell to other countries rather than suffer the loss of sales, and importers often could find their raw materials in other countries as well.
One of the most significant trade-policy issues this year will be the future relationship of the US with the WTO, Hillberry said. Since World War II, the US has pushed for an international trading system with rules, yet President Trump has threatened to withdraw.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at mostly $122 per cwt on a live basis, up $1 to $2 from the previous week. Dressed-basis trade happened at $195 to $196 per cwt, up $3 to $4.
The USDA choice cutout Tuesday was down $0.24 per cwt at $209.42, while select was off $3.29 at $202.12. The choice/select spread widened to $7.30 from $4.25 with 187 loads of fabricated product sold into the spot market.
No live cattle contracts were tendered for delivery against the Dec live cattle futures contract on Tuesday.
The CME Feeder Cattle index for the seven days ended Monday was $141.81 per cwt, up $2.67 from the previous day. This compares with Tuesday’s Jan contract settlement of $145.32, down $0.10.