In Case You Missed It
How The U.S. Can Avoid A New Farm Crisis
John R. Block
Des Moines Register
August 20, 2018
The Farm Crisis of the 1980s holds lessons for the Trump administration. While there are differences from today’s hard times on the farm, the similarities are important.
Like President Reagan, President Trump inherited severe economic conditions among farmers. While President Reagan remained popular with farmers, rural America was brutal to his party in the 1982 midterm elections. The problems we did not fix by midterms became the problem of the president and his party with enduring effects on support for his policies in Congress.
Today, the U.S. economy is generally in great shape, but times are hard for farmers. Last year, net farm income slumped to a 16-year low. Even President Trump’s tax reform and pushback on overregulation have not yet moved America’s farmers to a sustainable economic footing.
Rural America generally felt disregarded and often hurt by policies of the previous administration. Rural America supported President Trump by a three-to-one margin. Farmers are sticking with President Trump, but just as the midterm elections are approaching, so are the fall crop harvests. While farmers closely watch trade wars buffet their markets, they feel the pain of depressed markets only when they sell, often at harvest. President Trump is right that farmers are sticking with him, because they understand the unfair trade barriers imposed by Europe and China.
Free trade is almost an article of faith in farm country. It is recognized as an economic driver for America as a whole and farmers in particular. So Trump’s threats to important trade relationships are unsettling. Rural America knows from experience that the economic importance of trade is not just in farmers selling raw agricultural products. One in five American jobs is agriculture related. So, in rural America, there is eroding support for President Trump’s escalating trade tariffs, although there is continuing support for President Trump despite his trade policies.
The consequences of recent trade disruptions are far more than a rounding error. The price of farm good exports dropped 5.3 percent in July. That was the biggest percentage fall since October 2011, when prices decreased by 6.5 percent, according to numbers released by the Bureau of Labor Statistics. Soybean prices are at a nine-year low and have dropped approximately 12.8 percent since spring planting on my family farm in Illinois. This is not a world market event. U.S. soybeans typically trade at a modest premium to Brazilian soybeans. The current trade disputes have caused Brazilian soybeans to trade at a 20 percent premium to U.S. soybeans. America’s sorghum and hog farmers have also suffered major trade-related hits. With the trade war raging, the U.S. Department of Agriculture (USDA) has forecast a further 8 percent decline this year in net farm income.
American farmers appreciate the sentiment behind the Trump administration’s announcement of up to a $12 billion trade war aid package for farmers. However, no one in farm country is celebrating an aid package. America’s farmers want trade, not aid.
The 1980s farm crisis proved that the sweep of farm-related economic damage is powerful and persistent. Once the harm is done, it irreversibly sweeps out from farms through the broader rural economy. To compound that harm with loss of international markets would swiftly force the wave of damage through value-added agriculture markets and jobs. So, for President Trump, timing is critical.
Farmers will stick with Trump if he makes good on his promise to book major wins and remove the unfair barriers imposed by other countries.
We need a quick NAFTA-2.0 agreement that will build upon our strong trade relationships with Mexico and Canada. Let’s wrap up trade reform with Europe and together pressure China to accept fair trade and protect intellectual property. And with the U.S. and China set to meet around the negotiating table this week, it’s hopeful that we may see progress sooner rather than later.
Settling at least parts of the multifront trade war would calm some important markets and confirm that President Trump’s aim is the deal, not the dispute. Doing so before fall harvest and midterm elections would be good policy, as well as good politics.
John R. Block is a farmer and Trump supporter who served as Secretary of Agriculture under President Reagan between 1981 and 1986. He joined Americans for Farmers & Families to advocate for free trade policies.
To access the op-ed, click here.