By former USDA Secretary John R. Block
I was on the farm in Illinois last week. I went into the coffee shop, talked to neighbors, and all the questions were about a trade war and the farm bill legislation.
Almost everyone in the county is a Trump supporter. They understand that the U.S. runs a massive trade deficit. It needs to be fixed. But that isn’t agriculture’s fault. Agriculture has a positive trade balance.
Turn to the North American Free Trade Agreement (NAFTA). High-level negotiations last week were not able to come to a general agreement. Perhaps the most difficult program that the U.S. wants to fix is the Canadian dairy program. It is not free market. It is government-managed, and it costs us. Unless a breakthrough happens quickly, with elections coming up in Mexico and Canada, don’t expect a fix this year.
Early this week, there was optimism about our Chinese trade dispute. But many questions remain. China has already cut back on buying our soybeans, corn, pork, and other products. Nevertheless, the U.S. has exported more pork and beef this year than ever before, most to other countries – not China. Keep in mind that there is a finite amount of food products produced in the world, and when China buys soybeans from Brazil instead of us, we will sell to Brazil’s customers.
In 1978, President Carter embargoed our grain shipments to the Soviet Union. That year, the Soviet Union imported a record volume of grain. They just didn’t buy it from us. There is always someone willing to sell and someone willing to buy.
I am still optimistic that we can settle our trade disputes on a positive note.
Look at the farm bill. Passing the new bill is going to be a heavy lift. Would you have thought that the sugar program could be a deal breaker? Well, the sugar program is an old-school, supply control, price support program. Over the last 30 years, we got rid of almost all of those kinds of support programs. Remember, we had land set asides and price supports on all of our grains. No more, and it may be time for sugar to compete in a free market. My guess is sugar will make it through one more farm bill. Why? I don’t know.
Crop insurance will be a target for cuts, but should survive with very little pain.
John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill. If you would like to review his radio shows going back more than 20 years, visit johnblockreports.com.