Corn and Soybeans Rally on Chinese Demand and Brazilian Supply; Biden Promises Sane, Boring Trade Policy

Last updated on 2020-11-21

Rapid City commentator and trade expert John Tsitrian says the corn and soybean markets are rallying thanks to shifting demand and supply in China and Brazil:

China’s pig herd, reduced big time by a flu that cut that country’s demand for soymeal feed, has been rebounding lately. That comes just at a time when Brazil – our principal competitor in the Chinese soy market – had a tough year with its crops and, weather conditions being what they are, looks to have problems in 2021 [John Tsitrian, “Grain Prices Have Been Moving up Bigly Since Joe Biden Got Elected. It’s Supply, Demand, and Hope for Better Times Ahead,” South Dakota Standard, 2020.11.19].

But Tsitrian also hopes the markets recognize that our farmers will be better off now that we’re putting a fact-based adult back in the White House who won’t sideline the U.S. from the global economy:

Trump’s whole “trade war” schtick was as phony as could be and put us in a marginalized position while the rest of the world has moved on without us.  I wrote about this a few days ago as China and 13 of its Asian-Pacific trade partners created the biggest trade bloc in the world . . . without the United States.

So, while the immediate rally in grains is based on the global supply/demand situation, my instincts, honed by a bit over a decade trading on the floors of Chicago’s options and commodity exchanges, followed by another decade brokering and producing livestock here in South Dakota, tell me that a change is in the air, one that will encourage a substantial wave of optimism about how our farmers will once again be able to compete in a world market [Tsitrian, 2020.11.19].

Biden has said he will lift the Trump tariffs that hammered our farmers and required billions on vote-buying farm-welfare checks, but Republican opposition and sensible multilateral trade diplomacy may keep Biden from immediately cancelling Trump’s worst trade ideas:

…Biden has taken several opportunities to speak out against tariffs. For example, his campaign noted the nation’s “farmers and rural communities have paid a heavy price for President Trump’s tariffs” and criticized the Trump administration for engaging in a “damaging and erratic trade war without any real strategy.” In August, Biden said he’d work to eliminate U.S. tariffs on goods from China.

That’s great. But doing so may be an uphill battle. Even if Biden wants to roll back Trump’s tariffs, he’ll likely face obstacles from GOP lawmakers, due to the fact “many Republicans are no longer the free-traders of years past,” Fox Business notes.

Given that opposition, rather than work to repeal Trump’s tariffs immediately, experts predict Biden may use the ongoing presence of the existing Trump tariffs to try to extract concessions from some countries, including China, before removing the tariffs. That means Biden is “unlikely to erase U.S. tariffs on $370 billion in Chinese goods early in his presidency, trade experts and international economists say,” MarketWatch reports.

“The difference is that Biden is likely to build multinational coalitions and exert joint pressure in a multilateral framework rather than going it alone or threatening to pull out of international bodies, as Trump has done,” Reuters posited this week [Baylen Linnekin, “Will Biden Repeal Trump’s Destructive Food Tariffs?” Reason, 2020.11.14].

But remember: Trump’s tariffs are taxes on Americans and restrictions on personal liberty in the marketplace. Eliminating those tariffs is a great opportunity not only to help South Dakota farmers get back in the game but also to once again prove to America that Republicans don’t really believe their own rhetoric about low taxes and that Democrats can deliver real, smart tax relief to regular American taxpayers:

In contrast, reducing or eliminating the Trump tariffs, which a Biden administration could do without congressional authorization, would be a relatively quick form of relief to businesses and households, with outsized benefits to lower- and middle-income households (recall that tariffs are regressive) [Erica York, “Biden Could Provide Business and Household Relief by Eliminating Trump Tariffs,” Tax Foundation, 2020.11.16].

But ultimately, expect President Biden to make trade policy boring again… and for South Dakota farmers looking for stable, open access to global markets, Biden’s boring will be good for business.