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July 20, 2018
By Gale Lush
WILCOX, NE—July 20, 2018: “The Trump Administration’s tariff regime and trade war may well have a worse, negative economic impact on American farmers and the rural economy than the Nixon, Ford, Carter and Reagan embargoes and trade restrictions,” said Gale Lush, American Corn Growers Foundation (ACGF) Chairman, a corn, soybean and wheat farmer from Wilcox, Nebraska.
"President Nixon’s 1973 U.S. soybean embargo against Japan resulted in Brazil becoming a long term permanent U.S. export competitor as Japan diversified its future sources of soybean supplies by investing in Brazil’s soybean production infrastructure. Today Brazil exceeds the U.S. in soybean exports. President Ford embargoed the Soviet Union in 1974-1975. Corn prices dropped from $3.02 in 1974 to $2.54/bushel in 1975."
"We may well be headed back to 1970’s nominal corn prices. Ironically, farmers would have to get about $12.48/bushel for corn in 2018 dollars to equal those 1970’s prices using the USDA GNP deflator.”
Lush added, “The automatic ‘go to’ reference embargo always seems to be President Carter’s 1980 Soviet grain embargo. Even with the notorious Carter embargo the annual average price of corn went up from $2.52 per bushel in 1979 to $3.11 per bushel in 1980. President Trump’s tariffs that now jeopardize U.S. corn, soybeans, wheat and meat exports could have a worse economic impact. While U.S. trade agreements with foreign countries and billions of dollars of farmer-funded market development since the 1980’s and 1990’s facilitated at least some level of export opportunity for U.S. corn and other commodities the tariff uncertainty puts that demand up in the air now, to the advantage of our foreign export competitors. Ironically, Brazilian soybean prices have traded recently at a $1.96/bushel premium to U.S. soybeans due to U.S. tariffs and trade restrictions. Indeed, a Creighton University economist says the new tariffs are hurting grain prices which were already weak and that the recent trade disputes may shrink profits. Ethanol-driven domestic corn demand is the damage control economic engine that has offset less-than-projected export demand. However, the Trump Administration has also added economic insult to economic injury by limiting that market and reducing domestic corn demand by 500-700 million bushels due to ethanol blending waivers for big oil companies. The Administration must immediately raise the ethanol Renewable Fuel Standard (RFS) to a mandated 15% or higher year-round ethanol blend.”
Dan McGuire, ACGF Policy Analyst stated that the time to have headed off the negative impact of globalization and unfair trade practices on U.S. workers, U.S. wages and U.S. manufacturing industries was in the 1980’s and 1990’s by not going down that road in the first place, when the United States was pushing globalized free trade policies via the World Trade Organization (WTO). McGuire said, “globalization and the related ‘race-to-the-economic-bottom’ trade policy horse is so far out the barn door and down the road that we can’t even see the dust. Foreign export competitors are investing in agricultural production and export infrastructure from South America and Russia to Africa. The latest U.S tariffs on foreign markets for U.S. agricultural commodities will serve to facilitate major new investments by foreign export competitor countries. Just as with President Nixon’s embargo of U.S. soybeans to Japan this Administration’s tariff trade war will likely cause even more new soybean and grain production infrastructure and marketing investment in South America and elsewhere. U.S. policy makers must remember that South America still has an amount of new land that can be brought into production that is equal to all the grain and oilseed production acres of the United States. Mitigating the negative economic impact of the Administration’s trade war is the Administration’s responsibility. Without the past farm program farmer-owned grain reserve and on-farm grain storage payments, other measures must be enacted. One immediate measure needed is for EPA to announce that the RFS will immediately mandate 15% ethanol blended into gasoline for all 12 months of the year. A 30% ethanol mandated blend would be much better but 15% is a start.”
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