​​​The Trade and Policy Environment for Agriculture

February 2020 | 19 min., 57 sec.
by Darren Hudson
Texas Tech University

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Summary

​The trade environment involves three key sets of variables: China and the trade deal, macroeconomic conditions globally, and potential political instability. We know that the trade dispute has had significant impacts on trade with China, especially for soybeans. Resolving that dispute will help but not cure the problems. In the Phase 1 trade agreement signed in January 2020 (after this presentation was delivered), China committed to significant increases in purchases of agricultural products, but exactly what products and whether reaching their goals is possible remain to be seen. Regardless, we can presume that the deal will help support U.S. prices by increasing offtake of U.S. commodities. However, China remains one of the largest subsidizers of agriculture around the globe. These subsidies damage the competitive position of U.S. and other exports to China, and so in the long run, addressing China’s egregious violations of the WTO agreements will be necessary. Current macroeconomic projections are not particularly favorable to U.S. agriculture. Higher energy prices will squeeze input costs, and higher interest rates will both raise the cost of borrowing money and strengthen the U.S. dollar, thereby reducing export competitiveness. Therefore, forecast U.S. commodity prices are relatively flat. Of course, the Phase 1 deal with China will alter that trajectory some in favor of higher prices in the longer term. Finally, political instability in Hong Kong and the United States and uncertainty about other trade relationships between the United States and former NAFTA countries, as well as Europe, all add some uncertainty to long-term projections. Some of the issues have been resolved (USMCA), but others have not.

About the Presenter

Darren HudsonDarren Hudson is the Larry Combest Endowed Chair in Agricultural Competitiveness and Director of the International Center for Agricultural Competitiveness at Texas Tech University. He received his BS in agribusiness and economics from West Texas State University and his MS and PhD degrees in agricultural and applied economics from Texas Tech. Hudson specializes in agricultural policy, trade, and marketing, as well as behavioral economics. He has served as a fellow for the Farm Foundation in the area of globalization and as chair of the Food and Marketing Policy and the Agribusiness sections of the American Agricultural Economics Association.​​

Contact Information:
Email: darren.hudson@gu.edu

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