By former USDA Secretary John R. Block
The Brits jump ship and the UK is on its way out of the European Union. I understand the UK getting sick of the regulations and rules written in Brussels, not London. European agriculture is heavily subsidized and regulated – much more than ours. I would expect UK – agriculture where they are much more willing to accept GMOs than Europe – to benefit from the split in some ways. However, UK farmers will likely see their level of government subsidies diminish. That is a big deal.
We may have the Atlantic Ocean separating us from Europe, but in the short run, we will not be exempt from their actions. The Dollar has shot up in value and other currencies in the world have fallen. The Pound is down in Britain. The Euro is down in Europe. Currencies are down in China. Our farm products are going to be more expensive and there is risk that will dampen demand.
Agri-Pulse Daybreak reports that ag economist Professor Chris Hurt, Purdue University, says our pork exports will suffer. Did you realize that the EU nations (28 countries) have been the largest pork exporter in the world the past 2 years? With this new price advantage, they can make it harder for us to keep pace. It is likely our sales of corn and soybeans will also struggle against currency headwinds.
At the moment, there is a lot of uncertainty. After time, this turmoil will all settle down. In my opinion, in the end, we will do fine. After all, U.S. agriculture is the envy of the world, and our nation’s economy (although not great) is strong enough to endure the turmoil.
We do have some trade concerns that need attention. I am a big supporter of our trade agreements. I think they have provided a dramatic boost to our ag exports. However, with the turmoil in Europe, our trade agreement with Europe is all but dead. I am not very optimistic about the passage of the Trans Pacific Partnership (TPP). Our two Presidential candidates both oppose it. According to the Washington Times, “This week, Donald Trump vowed, if elected, he would cancel the TPP and demand Mexico and Canada accept sweeping changes in the North American Free Trade Agreement – or else he would nix that one, too. Not a happy thought.”
John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill. If you would like to review his radio shows going back more than 20 years, visit johnblockreports.com.