Commodity Insight: A done deal

Finally, a trade deal between the United States and China has been signed, and in theory, it should be beneficial to both countries.

According to AgWeb.com: “In an agreement signed Wednesday at the White House, China committed to importing at least $12.5 billion more agricultural goods this year than in 2017, rising to $19.5 billion next year. China will also ‘strive’ to purchase an additional $5 billion a year in farm products. That could get total purchases next year toward the $50 billion mark.”

In the trade deal China has promised to buy a variety of goods from each major industry. Those major industries are manufacturing, agricultural, energy and services.

In agricultural, they are committed to buying: soybeans, pork, beef, wheat, jams and jellies, corn, flour, cotton, horses and honey. Of course, depending on market conditions, other ag products may be bought.

Obviously, what is actually bought, how much bought and when needed is top secret and only known by China. And they are playing that card close to their vest.

I view the China trade deal as “new-found demand.” By any measure, Chinese demand for a wide variety of food stuffs is bullish and great news for U.S. farmers and ranchers.

How bullish the trade deal actually is remains to be seen. And with climate change issues on the horizon in the coming years, it will only take a bit of a problem in a growing season anywhere on the globe to send grain and livestock prices to much higher levels.

Senate Finance Committee Chairman Chuck Grassley of Iowa stated loud and clear the day of the trade deal that American farmers and ranchers bore the brunt of the trade war pain for the past two years.

American agriculture has been suffering greatly the past few years, but now things look to improve going forward. Of course, the pain in recent years for U.S. agriculture is not nearly as horrific as what took place in the farm crisis of the 1980s.

From Iowapbs.org: “During the 1980s, farmers in the United States were confronted by an economic crisis more severe than any since the Great Depression. Many of those who relied on agriculture for their livelihoods faced financial ruin. The epicenter of the downturn was in the Midwest, but the effects quickly rippled to other areas where agriculture played a prominent role in the local economy.”

To learn more about the farm crisis, go to: www.iowapbs.org/mtom/classroom/module/13999/farm-crisis.

In my book, “Back to the Futures,” in a chapter entitled “News & Views I,” I published a piece from the Aug. 2, 1989, issue of the St. Louis Post Dispatch.

The article was years after the farm crisis had ended and written tongue-in-cheek accompanied by a wink. Here is what published.

Last Will of Mr. Farmer

I leave:

To my wife, my overdraft at the bank... Maybe she can explain it.

To my banker, my soul... He has the mortgage on it anyway.

To my neighbor, my clown suit... He’ll need it if he continues to farm as he has in the past.

To the ASCS, my grain bin... I was planning to let them take it next year anyway.

To the county agent, 50 bushels of corn to see if he can hit the market... I never could.

To the junkman, all my machinery... he’s had his eye on it for years.

To my undertaker, a special request. I want six implement and fertilizer dealers for my pallbearers. They are used to carrying me.

To the weatherman, rain and sleet and snow for the funeral, please... No sense in having good weather now.

To the gravedigger... Don’t bother. The hole I’m in should be big enough.

Were the past two years trade war with China as bad as the farm crisis of the 1980s? No. But moving forward, the financial fate of U.S. farmers and ranchers will improve.

Such a view is not much of a surprise because the title of a past column I penned was entitled “Far Better Times Ahead.” I ended that column by stating: “The combination of unexpected demand from China and climate change will spawn historically volatile markets with a decidedly bullish bent.”

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