21 Aug 2018
One year of Trump policy impacts global ag markets
As President Trump approaches the first anniversary of his inauguration, AHDB’s Dr Amandeep Kaur Purewal and Aidan Wright look at his impact on the cereals and oilseeds markets
Alex Black
With the US a major global agricultural player, Donald Trump’s actions as President have already had a huge impact on grain markets and their effect will continue to be felt across the agricultural world.
The future of the North American Free Trade Agreement (NAFTA) still hangs in the balance, which could have a potential impact on the balance of the maize trade, and questions remain over the future of the biofuels industry. Changes to trade with China could also hit the oilseeds markets.
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As President Trump approaches the first anniversary of his inauguration, AHDB senior analyst Dr Amandeep Kaur Purewal and analyst Aidan Wright looked at the impact a year of President Trump has had on markets.
The Dollar
Despite the dollar initially strengthening, it has dropped 9 per cent against the pound and 12 per cent against the euro since Mr Trump took office.
While many presidents have championed a strong dollar, Mr Trump has welcomed the weaker currency because it can support exports and help reduce trade deficits.
With the dollar the currency of global trade, its strength can affect world markets. However, the benefits of a weak dollar have not yet been felt, with US exports so far remaining uncompetitive.
NAFTA
Renegotiating the North American Free Trade Agreement (NAFTA) with Canada and Mexico was one of the President’s key campaign pledges.
Because of this uncertain trading future, Mexico has looked for alternative countries to source maize from, increasing imports from Brazil and Argentina.
The knock-on effect of a collapse in US sales could be considerable, with American exporters having to find new markets, but South American prices being supported by Mexican trade.
Chicago maize prices are used as a global benchmark, which means there could be an impact on the UK.
Biofuels
The top three maize-growing states were vital swing states for President Trump in the election, but the oil industry has also put pressure on the administration.
Policy will no longer be driven by environmental concerns after the US withdrew from the Paris Climate Change Agreement and the head of the Environmental Protection Agency has expressed scepticism about fossil fuels’ contribution to global warming.
However, the President’s ambition for the US to become ‘energy independent’ could offer hope for the biofuels industry, which accounts for 44 per cent of domestic maize consumption.
Proposed duties on Argentine imports of biodiesel could also boost domestic prices.
Soybeans
Anti-China rhetoric heard on the campaign trail has been toned down, but there has been limited progress on trade talks.
The US wants to reduce its trade deficit, but in agricultural trade, particularly oilseeds, the US runs a surplus.
And with increasing US production, growing Chinese demand has supported prices. China is also fairly reliant on US production. However, this could be an area to watch with a weaker US dollar making Brazilian soybeans more competitive.
Brexit
While the President has been portrayed as a Brexit supporter and endorsed the idea of a US-UK trade deal, it seems Mr Trump has become less enthusiastic as concerns over US jobs have grown and the administration has had disagreements with UK officials.
Controversial US standards, such as hormone-fed beef, also remain stumbling blocks to a bilateral deal.
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