If you’re trying to make sense of the topsy-turvy commodities market, you’re not alone. Looming trade wars with Canada, Mexico and China — the top three U.S. export markets — as well as on-again/off-again tariffs are causing a lot of concern.
“I don’t like these types of markets because they’re impossible to navigate,” says commodities markets analyst Joe Vaclavik on the latest episode of Farm Journal’s Unscripted podcast. “The market is as good as the next headline. It’s fear and greed and uncertainty.”
Founder and president of Standard Grain and host of the Grain Markets and Other Stuff podcast, Vaclavik adds: “It was like this in 2018 when the trade war happened. It may be like this for a while. It’s not fun.”
That said, he remains optimistic for the long-term about resolving tensions with Canada and Mexico.
“The numbers will tell you the U.S. has an advantage in a trade war,” he explains. “They need us to buy stuff from them. What they export to the U.S. is a big chunk of their respective GDPs, whereas what we export to them is not really a significant portion of our GDP. In the short term, anything is possible, but I feel like this won’t last long.”
With 40% of U.S. corn exports going to Mexico, a quick resolution would come as a relief to corn growers.
“I think Mexico is going to be our best corn customer for a long time,” Vaclavik says. “It just makes too much sense.”
The Possibility of Relief Payments
Vaclavik is optimistic about direct relief payments for producers from the government, though these payments can be a mixed blessing.
“The payments are going to result in possible input inflation and messed-up land markets, and keep the bad operators in business,” he says. “But they’re going to help make you feel a little bit better.”
At Commodity Classic in early March, Secretary of Agriculture Brooke Rollins assured the industry the government is already preparing for the possibility of trade wars impacting U.S. agriculture, as they did in 2018 and 2019. While the payments help, they can mask the hard truth about the farm economy right now.
As far as what producers should do with all the news about tariffs and trade wars, Vaclavik advises: “Wait a couple of weeks and see how this pans out. It’s going to be different from 2018. I don’t think it’s going to last as long. And I don’t think it’s going to be as deep.”
You can also watch the latest episode of Unscripted on Farm Journal TV.
