Washington Insider -- Tuesday

Washington Post and the Soybean-Tariff Debate

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Farm Bill Focus On Nutrition Continues

President Donald Trump has become a focus in the farm bill situation even as the continuing trade war is upping odds a new farm bill will get completed. But the key House-Senate difference between the two measures is on a topic that President Trump may weigh in on: the House push to tighten work requirements for food-stamp recipients.

Unknown is whether the president will insist the new farm bill include the more conservative provision from the House bill. Congressional sources say there is “some give” regarding the House food stamp language, but to date, Democrats have not yet set down to negotiate the matter. That will change when House-Senate conferees return to Washington and debate the differences in the two chambers' bill.

Trump prefers the House version but has not indicated how far he is prepared to go for the House approach, that assuredly does not have the votes to pass the Senate where it needs 60 votes to clear procedural hurdles and Republicans hold only 51 seats.

The Senate version of the farm bill got 86 votes, after defeating a measure advocated by the president in a 30-68 vote.

Trump or his top officials have not issued a veto warning should the farm bill conference report not tighten work requirements.

More US-Japan trade talks coming in September

U.S. Trade Representative (USTR) Robert Lighthizer and his Japanese counterpart pledged to expand bilateral trade between their two countries and will meet again next month to explore ways to deepen cooperation on international economic issues, USTR said after two days of talks between the two countries.

In a statement, USTR said they were "frank discussions" on trade and the officials worked to understand each other's "basic views and positions," the statement said relative to talks between Lighthizer and Japanese Minister for Economic Revitalization Toshimitsu Motegi.

"Based on these discussions, both sides agreed to explore ways to fill the gap between their positions and to promote trade between the United States and Japan, and to expand areas of cooperation based on common understanding," the statement said. The two leaders will work to "further deepen the discussions" during another ministerial meeting, to be held sometime in September, but no specific date or location was provided.


Washington Insider: Washington Post and the Soybean-Tariff Debate

The Washington Post is deep into the business of keeping journalism honest, with its longer analyses and Pinocchio awards, and is now ambitiously plunging into the fight over what is really, really true about soybeans.

This is important because just hours after President Trump’s tariffs on Chinese goods took effect July 6, China retaliated, leveling equivalent tariffs on a wide range of U.S. goods — including agricultural products. And, just as quickly there erupted a bitter fight over the hows and whats and impacts of that policy.

So, the President weighed in with a view that “tariffs are the greatest!” However, vulnerable Democrats running for reelection in red states aren’t as enthusiastic, the Post says. They argue that farmers — especially soybean farmers — are the first victims of the administration’s trade war. Still, the administration says Europe will pick up the slack in demand; that the tariffs were a necessary adjustment; and that incomes and commodity prices were falling long before he took office, so not the administration’s fault.

So, the Post asks, “how can the president’s tariffs be both savior and disaster?”

The Post article begins with the well-known warning that prices for agricultural products are “shaped by a plethora of forces, including the number of plantings, global trends, weather and what happened the year before.”

It then turns to Mary Marchant, a professor in VA Tech’s Applied Economics Department who notes supply and demand lined up in favor of U.S. ag during 2011-14 producing “big profits,” but that farm income began to decline in 2013 (not 2003 as the President suggests) and that the decline continued through 2016 as “increased plantings and good weather boosted production.”

The item also looks at a second political claim from a senator that “a study shows that corn, soybean and wheat farmers across the U.S. have already lost $13 billion because of the administration’s trade war.” The Post inquired about the study and was pointed to an op-ed from the National Farmers Union that cited the New York Times, which, in turn, included a quote from the Wall Street Journal.

Christopher Hurt, a Purdue ag economist, is cited as saying that “the total value of this year’s U.S. corn, soybean and wheat crops dropped about $13 billion, or 10%, in June.”

However, Hurt says the source of the $13 billion figure was not exactly “a study,” but was “simply a quote” and that he calculated this figure by multiplying the estimated production for 2018 crops by the change in daily futures prices for each of the commodities from June 1 to a given date. “That means his estimate changes every day, on the basis of the “expected” price on the harvest date, not right now.”

Moreover, Hurt made his estimates using commodities futures prices that do not immediately affect all farmers, so that such “projections shouldn’t be considered a value that has been already lost, the Post said. It also noted that soybean prices still have not dropped “50% since 5 years before the Election,” as the President claimed, and that “even the lowest projection for the 2018-2019 year still doesn’t justify the administration’s claim.”

Agricultural trade agreements have been “relatively stable during the past 10 years,” Hurt reminded the paper, and that there’s little evidence that “bad (terrible) trade deals” were the primary cause of the decline. Marchant agreed, and said that “The bottom line is trade has been good for agriculture overall, and we are dependent on it for our success.”

The administration did not respond to requests for comment, the Post said, but the senator’s office deleted its claim, in spite of “daily inquiries” and “serious concerns” from farmers about how the administration’s trade policies are hurting their bottom lines.

So, the Post called the ag commodities market “complicated” and said that politicians seem intent on glossing over this fact. It blames “good weather, not bad trade agreements” as a primary cause. It says both sides of the trade debate “neglect the nuances of the agricultural market,” and awards its Pinocchios as a result.

Then, the Post commented that “there is little doubt that the administration’s trade policies and tariffs have had a negative effect,” but criticized the use of “an ever-changing estimate as a study.” It says oddly, “the future may look bleak, but it’s still too soon to know the full impact.”

The fact is, the paper seems to be missing a good bit of the point here. Looking at market movements and guessing at the magnitude of gains or losses on the basis of current evidence is reasonable as an early indication – even though it is still quite rough, a fact the item implicitly acknowledges with its “little doubt” comment.

However, the administration’s effort to say that recent price declines came not from its policies, but from an earlier “bad trade deal” is far harder to credit, especially in light of its proposed new farm aid program.

Anyway, the administration’s tariffs are now being implemented, and the soybean marketing year is nearing its end, so the “summing up” time for the trade policies now in place is near at hand, and should be watched closely by producers as the details emerge, Washington Insider believes.

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