By John Berry
Will recent rumors of a trade war impact commodity prices?
The effort we are expending on managing our businesses may best be spent obsessing over those things we have control over. I believe, worrying about things I cannot control is more about self-pity than seeking a solution.
Occasionally, I do find it difficult to focus on successful business strategies in the face of political, and economic, uncertainty. In these situations I will not follow my own advice to reduce the noise 24 hours each day of news generates. Most of what we hear as reports of markets, trends, public policy, outlook, and all manner of global interactions is not necessarily useful, meaningful, reliable, or action oriented. Fear sells news.
An example of this is recent fixation on how a trade war might impact agriculture. Let’s look at 2017 numbers. In 2017 the U.S. imported (roughly) 20% more dollar value than we exported. This gives us the “trade deficit” we are concerned with at this time. I find the same number of people or research that claim a trade war is useful as I do that claim it useless. If we had unlimited time and interest we could review history and debate all the possible outcomes if a trade policy were to become more restrictive.
The below chart shows the export dollar value of a few ag items:
Export share of U.S. farm production, 2011-2013
A superficial review of the above chart suggests which ag commodities may be most impacted by shifting trade policy and the long term uncertainty these news stories, policy and eventual economic impacts business operators must deal with.
We will not argue what a trade deficit means, how it might impact an economy or historical methods used for solving the issue. What this trade deficit means to me is that U.S. consumers have benefited from utilizing lower cost sources for the goods we buy. We only import from others if the import is cheaper elsewhere, not available here (bananas) or we prefer this other thing (parmesan cheese) to what we have at home.
Most developing countries use their natural resources to gain foreign currency in an attempt to grow economically. A trade war typically harms these economies to a greater degree than developed economies. I find no record of a past trade war that achieved its objective or did-no-unintended-harm. Trade wars are for our public policy makers. Once this approach is initiated, we cannot influence the outcomes to any large degree.
Unfortunately, since our ag segment is one of the very few examples of our exporting to economic advantage it has gotten attention lately. Of course; if I were facing a trade war the first I say I will attack your most precious items. That is called “negotiating.” As I reflect on my grain marketing efforts so far this season and what remains to be done; I am sticking to my plan. We will deal with whatever comes next. I feel my time, talent and money is better spent managing what I can control.