Economists Say Montana Farmers Likely To Recover After International Trade Tensions
Regional economists say Montana farmers are in a good position to recover from setbacks caused by international trade tensions last year. This spring they’ll be watching to see if Mexico, Canada and China follow through with their promises, how commodity markets react and if the overall uncertainty over future trade relations starts to fade.Leonard Schock had a rough harvest last year. The wheat farmer from Vida, Montana says prices on his crops were so low, that he had to leave about 70,000 bushels of hard red spring wheat in the fields.
"And that was quite painful. First time ever, in my 47 years of harvesting," Schock said.
Schock formerly served on the Montana Wheat and Barley Committee board. He says the volatile markets brought on by trade disputes and weather have kept him from reinvesting in his farm with new equipment.
"We are constantly looking for ways to shave off of your expenditures and not go new, fancy, shiny, but slightly used, slightly worn, a little more ready to go to the field and substantially less dollars," Schock said.
Uncertainty surrounding trade combined with poor weather led some farmers to abandon long-term planning last season, but with the signing of the USMCA and the Phase 1 deal with China, farmers and economists say they feel optimistic that this year will be less volatile.
While some farmers did adjust their winter wheat seeding as trade tensions were in full swing and prices hit a decade low, most are unlikely to make the same changes to their spring crops.
"I think it was maybe just right in the nick of time," Montana Wheat and Barley Committee Bureau Chief Cassidy Marn said.
Marn says new negotiations, including ones to restore trade that was lost with Japan after the U.S. pulled out of the Trans-Pacific Partnership, might calm markets.
She says it’s been a tough few years for Montana farmers but not just because of tariffs. Unusual weather, has had just as big, if not a greater, impact on Montana farmers. For some, the confluence of issues makes it hard to tease out tariffs' lasting impacts.
Anton Bekkerman is a professor of economics at Montana State University and says that spring and winter wheat prices have been on the rise over the past few months.
"I think a lot of farmers are finding some optimism in that and we may see some spring wheat come back," Bekkerman said.
But he adds some uncertainty remains.
One question is about trade negotiations with India, which failed to move forward with President Trump’s visit last week. A smaller trade dispute between the U.S. and India has left Montana farmers with fewer opportunities to sell pulse crops, like peas, chickpeas and lentils. While pulse crops make up a smaller share of Montana exports than wheat and barley, the state is the largest producer in the country.
Bekkerman says he’s also waiting to see if the ink on the pages of recent trade deals translates into action. He says some economists and farmers are skeptical as to whether or not China will follow through with its quotas.
"There’s some promises that were made to buy $40 billion worth of U.S. agricultural goods and those are really high numbers. There’s some question about whether there’s even enough capacity to produce that much value of agricultural products," Bekkerman said.
China has made similarly large promises in the past and failed to follow through. There is also concern among U.S. farmers as the coronavirus slows the Chinese economy.
And even though China doesn’t usually import much from Montana, it could still have an indirect effect on Montana farmers. For example, increased soy and corn prices caused by exports could ripple out and lift up the wheat and cattle markets.
Canada has yet to ratify the USMCA but Bekkerman says it’s likely to happen soon, meaning good things for North American trade relationships that might have been at risk.
"I think they’re fairly likely to come back. One of the things they enjoy is geographic proximity," Bekkerman said.
He also says that there’s already infrastructure in place to move goods between the North American countries, which means trade between them will likely continue to be the most economically efficient.
Montana Wheat and Barley’s Cassidy Marn says the industry will be watching closely to see how markets respond to the new potential for stability.
"If anything sees a price spike or a change, it could definitely affect what we end up doing in April," Marn said.
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