Top 10 Ag News Stories of 2018: No. 1

Trade Disruptions Led to New Negotiations and an Aid Package for Farmers

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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(DTN photo illustration by Nick Scalise)

OMAHA (DTN) -- Each year, DTN publishes our choices for the top 10 ag news stories of the year, as selected by DTN analysts, editors and reporters. We complete our countdown today with the No. 1 story of the year: international trade issues -- including tariffs, tough negotiations and trade aid.

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Agricultural economists will one day look back at the trade fights of 2018 and provide the hard numbers to declare whether tariffs and tough negotiations proved to be deferred gratification for American farmers or the erosion of U.S. market share.

President Donald Trump gave us tweets declaring that "trade wars are easy" and other countries had better stick to their word because he doesn't mind being called "Tariff Man."

Trump kept the tempo constantly changing, moving from renegotiation to the North American Free Trade Agreement, to putting tariffs on steel and aluminum imports, to summit talks with European Union leadership, threatening tariffs on auto imports from Europe and Japan, and finally raising tariffs chip-by-chip in a poker hand with China.

U.S. farmers got some improvements in the new North American trade deal, the United States-Mexico-Canada Agreement (USMCA), which largely protects the export market with Mexico while making some agricultural improvements with Canada, notably over wheat grading and slightly more dairy market access. The USMCA, though, still has to be finalized by Congress. And at least some agricultural exports are being hurt by retaliatory tariffs put in place by Canada and Mexico, which still face steel and aluminum tariffs from the U.S. As the year closed, a bipartisan group of congressmen were lobbying the Trump administration to drop the steel and aluminum tariffs against Canada and Mexico.

Another big trade battle started in early spring as the president hit $50 billion in Chinese products with 25% tariffs. In retaliation, China first hit U.S. pork products with a 25% tariff, and stated that, depending on U.S. actions, the Chinese government would impose 25% tariffs on soybeans, corn and corn products, wheat, sorghum, cotton, beef and beef products, cranberries, orange juice and tobacco and tobacco products. After President Trump placed a 25% tariff on goods that contain "industrially significant technologies," China announced it would impose its tariffs in early July, barring a settlement.

China stopped buying most U.S. agricultural products in July, and as U.S. farmers saw crop estimates continue to rise, it became obvious U.S. farmers would have a large soybean crop with the possibility of nowhere to ship most of it.

In September, the U.S. put a 10% tariff on $200 billion more in Chinese goods, cutting more into consumer products. The U.S. threatened to go to 25% in January, barring some significant give by China.

To ease concerns, the White House announced in August it would spend $12 billion for trade aid to help farmers through the low prices caused by the lost exports. The Market Facilitation Program gave the lion's share of per-bushel aid to soybean growers, leading to some complaints from corn and dairy groups about their export losses and how the payments were calculated. The payments were designed to come in two rounds, and USDA finally announced the second round of payments Dec. 18 after "arm wrestling" with the White House Office of Management and Budget about the costs.

The disturbance in trade and income decline it created helped spark Congress to complete a new farm bill and provide some small boosts to the farmer safety net.

Soybean futures did rally after President Trump tweeted in early November he would meet with Chinese President Xi Jinping at the G-20 summit in late November. The meeting created great expectations, and the president walked away with a 90-day negotiating window for a longer-term trade deal, as well as a promise from Xi that China would start buying soybeans and natural gas from the U.S. again.

Slowly, in mid-December, Chinese buyers finally started placing orders. As of early Dec. 31, 3.3 million metric tons of soybean sales have been announced since China began buying again, including sales to unknown, and with 2.83 mmt specifically identified to China.

The U.S. Trade Representative's Office will start 2019 trying to reach deals with China, Japan and the European Union.

Chris Clayton can be reached at chris.clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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Editor's Note: This completes our DTN top 10 list of the top ag news stories of 2018. Check out the blog by DTN Editor-in-Chief Greg Horstmeier about this year's selections at https://www.dtnpf.com/…

If you missed the other top stories, you can find them at the following links:

Top 10 Ag News Stories of 2018

-- Best of the Rest: https://www.dtnpf.com/…

-- Top 10 Ag News Stories of 2018: 10, 9, 8: https://www.dtnpf.com/…

-- Top 10 Ag News Stories of 2018: 7, 6, 5: https://www.dtnpf.com/…

-- Top 10 Ag News Stories of 2018: 4, 3, 2: https://www.dtnpf.com/…

(ES/AG)

Chris Clayton