The Rabobank Food & Agribusiness Research and Advisory group has authored a report on the possible implications for the food and agriculture sectors of the election of Republican candidate Donald Trump as the 45th President of the United States. It states in the short-term ag markets and demand may be impacted by volatility in foreign currencies, as has been recently seen. For example, the U.S. dollar index surged to its highest level since December 2015 following the election.
“Looking towards the next year, it will be critical to watch potential revisions to trade agreements, labor policies and business regulations, as well as the effects these elements will have on economic growth,” states the report.
The report states the lack of market information creates uncertainty, and uncertainty generates market volatility. “Currently, the export share of U.S. agricultural production represents more than 20% in volume and value terms, making U.S. price formation highly dependent on foreign trade and therefore foreign currency,” said Pablo Sherwell, Rabobank head of Food & Agribusiness Research and Advisory, North America.
The report notes “trade agreements, agricultural policy and labor will act as key areas where potential policy changes could have longer-term implications on the industry as a whole.”
Trade Agreements: As the number-one global agricultural exporter, the U.S. food and ag sector is one of the main drivers of global agriculture and trade, reaching nearly $125 billion in 2016. Currently, the U.S. exports commodities that complement the rest of the world’s food supply-any change to U.S. agricultural trade agreements will not only affect global prices and trade dynamics but also U.S. farmer margins.
Farm Bill 2018: The current Farm Bill is scheduled to be renewed by 2018. Because the Republican Party holds the majority, the development, approval and implementation of the 2018 Farm Bill is likely to be a smoother process than that of the previous bill. Regulatory reductions have been a policy direction advocated by President-elect Trump during his candidacy, and it is likely that the direction will shift even more toward an environment of reduced regulation.
Labor: The U.S. food and agriculture industry is highly dependent on migrant labor, particularly in sectors such as produce, animal protein and food service operation. If immigration laws are enforced more strictly, business owners may face labor shortages, which would pressure their margins.
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