I am a fan of axioms, statements that are just generally accepted as true, no matter what the situation. One of my favorite axioms is "You can't judge a book by its cover."
I am also a fan of great movie lines. One of my favorites is from the 1950 classic "All About Eve," where Bette Davis famously says "Fasten your seatbelts, it's going to be a bumpy night."
These two quotes are great examples of what's happening in agriculture this past week. Since our last column, the Trump administration has been in the news regarding broad-based tariffs imposed on a variety of goods and commodities.
A full analysis of the tariffs is beyond the 650 word limit of this column. But the short story is this: In late March, President Donald Trump instructed the United States Trade Representative to apply $50 billion of tariffs on Chinese goods imported to the U.S. In response, the Dow Jones average fell more than 700 points. On April 4, May soybeans fell 22 cents to $10.15 per bushel in heavy trading. Much of the anxiety in the soybean market had to do with the fact that China implemented their own tariffs in response to the Trump tariffs, with the China tariffs covering several agricultural products at a rate of 15 to 25 percent, including 25 percent on U.S. soybeans, which is the United States' top agricultural export to China.
Scary stuff, right? It looked like we had a full-blown trade war in the brewing.
Well, you can't judge a book by its cover.
Since April 4, the May soybean contract on the Chicago Board of Trade is up 35 cents and counting. Hard red spring wheat - on the May 2018 contract - on the Minneapolis Grain Exchange is up nearly 55 cents since the beginning of the month.
Farmers, most of whom aren't even close to being in the field in this region, are asking "what gives?"
There are several theories to what is happening. But the fact of the matter is that it is way too early to tell what the long-term effect of these tariffs - on either side of the aisle - will be. There is an article on www.forbes.com by Kenneth Rapoza entitled, "Trump's Tariff Threats Are Working On China." Conversely, according to Tom Philpott on www.motherjones.com, "Trump's Trade War Is About to Screw Over California's Remaining Republicans." The New York Times has an interesting column by Steven Lee Myers entitled, "Why China Is Confident It Can Beat Trump in a Trade War." The numbers of opinions in the blogosphere are limited only by the amount of time you have to read them.
The fact is the Trump tariffs have not hurt farmers. And so far the objective indications are that they are helping farmers.
Politics aside, farmers who are making planting decisions are doing so based upon several variables. Among these variables are the late spring, the predicted weather pattern, seed and fertilizer prices, and seed and fertilizer supplies. One other variable farmers try to predict is what price they will receive for their commodities once they're harvested. That's the most interesting variable in the equation right now.
Markets tend to be volatile when there is uncertainty. During my undergrad days at North Dakota State University, an iconic agricultural economics professor of mine used the phrase "buy the rumor, sell the fact." When there is uncertainty, there are increased buying and selling opportunities, but with those opportunities comes increased risk.
As I write this, the fall prices for wheat, soybeans and corn are at $5.85, $9.50, and $3.37, respectively. I don't know much, but I do know that I will be astounded if those numbers are the same in September, which is only five months away.
So farmers, keep your eye on the markets daily. And watch the value of the dollar as a gauge of market direction, as well. And as Bette Davis said, fasten your seatbelts!