Ag Policy Blog

Commerce Secretary Wilbur Ross sounded a little like now-deceased former Agriculture Secretary Earl Butz in a press call Friday about scrutinizing trade agreements.

A reporter asked Ross about the business uncertainty created due to so much conflict over the White House efforts to renegotiate nearly every U.S. trade agreement. The reporter's question itself was a little curious as he suggested farmers don't know how much crop to plant because of uncertainty over trade agreements.

Ross responded that American farmers should plant as much as possible. "If I were a farmer, I would plant as much as I can logically plant under today's environment. And I would -- certainly wouldn't shrink my production just because there's going to be some renegotiation," the Commerce secretary said. "I think that would be silly."

It's unclear what Ross meant about "today's environment," meaning the market, regulatory or trade situation. His comments sounded a little like Butz, who served as Agriculture secretary in the early 1970s and called on farmers to plant "fencerow to fencerow" in 1973.

Ross added that American farmers would find another market for their commodities because of the overall global demand for food even if the current agricultural trade were displaced because of trade negotiations.

"The fact is that most of the rest of the world is incapable of feeding itself." Ross said. "So it isn’t as though this is a discretionary purchase by people, nor, in most areas of farming, is there gross overcapacity in the world. So if some country would cut back on what they purchase from us by going to someone else as a competing vendor, then whoever else had been the customer of that competing vendor is going to have to buy our stuff anyway."

Ross added, "I think it’s highly unlikely that worldwide food consumption will go down just because we renegotiate trade agreements."

The Commerce secretary made the comments in a briefing Friday afternoon about President Donald Trump's latest executive order. The president intends to mark his 100th day in office Saturday evening by signing an executive order at a rally in Harrisburg, Pa., that will require the Commerce Department and U.S. Trade Representative's Office (USTR) to review all current U.S. free trade agreements for possible renegotiation.

Ross's statements raised an eyebrow with DTN Senior Analyst Darin Newsom. Just because Mexico could turn to Brazil for its corn, that doesn't necessarily mean Brazil's previous buyers will come to the U.S., Newsom noted. "It’s not a zero-sum game. If Brazil has adequately rebuilt its stockpiles, like we did in corn from 2013 through 2016, it could increase its sales to Mexico while still supplying the bulk of its previous buyers. Proof of that is how strong demand is for U.S. corn this year. Not only are we servicing our normal customers (Mexico, Japan, South Korea), we are covering a lot of what Brazil historically sells to those countries as well as Peru, El Salvador, and others."

World corn ending stocks are projected to increase 11 million metric tons from last year, soybeans 10 mmt, and wheat 10.5 mmt, Newsom added. "In years when weather is not an issue, increased global production more than offsets growth in global demand, putting more importance on outside influences like policy, currencies, etcetera," Newsom said.

While farmers need to be concerned about the impacts of trade renegotiation, Newsom added he doesn't know if they can base their planting decisions of what could happen with the Trump administration and trade talks. "Farmers need to continue, as long as possible, planting what makes the most sense for their business and from a market point of view."

The president had intended to sign an executive order to declare the U.S. intent to withdraw from the North American Free Trade Agreement. That was before Agriculture Secretary Sonny Perdue stepped in, showed the president a map pointing out that withdrawing from NAFTA would hurt states that voted for him.

Instead, Trump's newest executive order will review the U.S. relationship with the World Trade Organization, as well as the 20 trading partners with which the U.S. has a bi-lateral or multi-lateral trade deal. The Commerce Department and USTR will have 180 days to produce a report on each trade deal with possible recommendations, including withdrawal.

"So that's the guts of it. Now, why? What is it really all about? I think everyone here is generally aware that we do have a big trade deficit," Ross said. "It’s some $700 billion -- not counting our trade surplus in services, just counting the trade deficit in goods; and it’s $500 billion, counting the trade deficit in -- after netting out the benefits of the exported services. So that's the general parameters."

Ross added that NAFTA will be part of the study, "a big part of it." That will help President Trump fulfill one of his campaign promises, Ross said.

"There isn’t a day that goes by that the President doesn’t discuss some aspect of trade," Ross said. "It's all a continuous activity because trade is so important to the economy, it's so important to the administration's four-point plan, and it's so important to the promises he made during the campaign. And as you've noticed, this president, unlike many others, is really trying his best to live up to his campaign promises."

Ross was then asked about the risks over renegotiating NAFTA and concerns for farmers, such as Iowa corn farmers. What is the message to farmers who export a lot of their crop to Mexico who might be concerned about how renegotiating these deals would affect them.

"Well, agriculture is one of the things that we do the best of any country in the world, and it is a huge source of export for us," Ross said. "So I can understand why they would have fear, because fear of the unknown is the worst fear. But our approach to the negotiations will certainly not be to undertake activities that would endanger the farmers. The farmers are very big sources of our export."

The secretary added, "Our idea in the negotiations is to try to do better with exports, not to try to truncate them."

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

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