The farmers are (still) restless.
Late last month, the Trump administration unveiled its second multibillion-dollar bailout package for American agriculture. This is necessary because, without getting mired in details everyone already knows, Trump’s trade war has restricted access to critical foreign markets to the detriment of hard-working Americans whose livelihoods are now at risk.
Trump’s ham-handed effort to rewrite the rules of global trade and commerce and roll back decades of globalization predictably resulted in a multi-front trade war, which has recently morphed into a multi-front stalemate. China is dug in, Europe is convinced there’s no utility in negotiating, Japan is hoping they can bribe Trump with front-row tickets to sumo matches and Mexico is pondering the prospect of across-the-board tariffs on everything they export to America unless the government can somehow figure out how to “eliminate” illegal immigration into the US within the next – checks notes – six days.
On Tuesday, Mexican officials expressed guarded optimism over the prospects for a deal, but Bosco de la Vega, head of Mexico’s agriculture chamber CNA, warned that if Trump goes ahead with the duties on Mexico, the country will likely retaliate with duties of its own on agricultural products from states where the president’s support is strong, a similar strategy to that employed by the Chinese. That would be yet another blow to American farmers.
“In the unlikely event that the US tariffs are enacted, we will be supporting the government in surgically implementing tariffs aimed at farm products in Republican states”, de la Vega told Reuters last week.
Read the history of Trump’s trade war and America’s farmers
With all of the above in mind, it’s little wonder that farmer sentiment, as measured by the Purdue University/CME Group Ag Economy Barometer, fell 14 points in May to 101 – that’s the lowest level since October 2016 or, more to the point, the lowest of Trump’s presidency. That puts the Ag Economy Barometer on par with ISM manufacturing, which is now also sitting at its lowest levels since before the election.
The title of the latest report from Purdue’s Center for Commercial Agriculture is “Farmer Sentiment Collapsing As Financial Conditions Continue to Decline”, which pretty much speaks for itself. But just in case it doesn’t, James Mintert, director of Purdue’s Center for Commercial Agriculture and the barometer’s principal investigator, spoke for it. Here’s a quick summary from James:
For the second month in a row, the decline in farmer sentiment was attributable to big declines in both the Index of Current Conditions, which fell from 99 in April to 84 in May, and the Index of Future Expectations, which fell from 123 in April to 108 in May. This month’s declines in the barometer and in its two sub-indices effectively erased all of the large improvement in farmer sentiment that took place following the November 2016 election. This month’s survey was conducted in mid-May, in the midst of a wet spring planting season, but prior to USDA’s announcement that a second round of trade dispute payments would be made to U.S. crop producers in 2019.
So, basically, farmers are feeling very nervous about both current conditions and future conditions, a truly deplorable situation – pardon the political pun.
As unfortunate as all of that is, things are even worse if you look at the Large Farm Investment Index, which dove to 37 in May. That’s down 11 points from April and, as Mintert notes, is “the lowest value since data collection began in fall 2015.”
But the saddest part of the whole survey comes when Mintert details the responses farmers gave to questions about the trade war.
In May, 65% of respondents said they expected a favorable outcome to the trade dispute with China, where that means it will be resolved in a way that “benefits US agriculture”. That may sound like an absurdly optimistic reading, until you discover that the number was actually 71% in April and 77% in March.
There are two main takeaways from that. First, Mintert has only been asking that specific question for three months, so the fact that the percentage of respondents who expect a favorable outcome has fallen from 77% to 65% in the space of just 90 days, says something about just how quickly the anxiety is rising. Second, and perhaps more importantly, the fact that two-thirds of respondents still believe this is going to work out to the benefit of US farmers is astonishing and speaks to just how effective Trump has been at dragging large swaths of the voting public into his reality distortion field.
Notably, the March survey contained a question about whether farmers believed “the soybean trade dispute with China” would be resolved by July 1. Three months ago, 45% of respondents said it would be. By May, that number had dropped to just 20%. Perhaps survey participants should extrapolate from the soybean experience to the broader trade war on the way to dragging that 65% figure for May down to about 30%, which is probably closer to the actual odds that this will ultimately work out in a way that’s any semblance of beneficial to American farmers.
Meanwhile, in yet another sad punchline, Reuters reported on Tuesday evening that according to records obtained through a Freedom of Information Act request, Foxconn offshored 155 jobs eliminated from an Indiana factory in November of last year. At the time, the company cited “changes in our business and production objectives.”
Foxconn has been going back and forth with Trump for the better part of two years on plans for a large Wisconsin plant, which the president has variously touted as proof that he’s keeping his promises of creating blue collar jobs for Americans. The status of that plant is seemingly in constant flux. Foxconn Chairman Terry Gou met with Trump earlier this month for a status update.
Although the 155 layoffs from the Indiana plant pale in comparison to the number of jobs the company would create were it to actually make good on the original plans for the Wisconsin facility (plans which, again, are now up in the air), Trump won’t be pleased with the bad press. Just about the last thing he needs right now is for America to get the idea that a company he’s tried very hard to cultivate a relationship with is offshoring jobs on his watch.
But wait, you haven’t heard to best part. The records obtained by Reuters show that the Labor Department has known since February where those 155 jobs went. Any guesses?
If you said Mexico, you win an avocado that’s going to be 5% more expensive this time next week than it is today, and 25% more expensive come October.