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Insight on Why Markets Haven’t Imploded Following TPP, NAFTA Announcements

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Agri Marketing magazine reports: 

At two different meetings last week, we asked prominent university experts the question “Why haven’t the commodity markets tanked following the cancellation of the Trans-Pacific Partnership agreement and threats to re-do the NAFTA trade agreement?”

At the Agribusiness Association of Iowa’s annual conference, Professor Ernie Goss, Chair and Professor of Economics at Creighton University who manages the Rural Main Street Index said, “First off we’ll see if this is all bark and no bite. The terms of NAFTA are still in place and Mexico and Canada are still buying U.S. ag products. Markets, of course, will react if something of substance occurs.”

Speaking at the “Farmland Owners Workshop,” Dr. Steve Johnson, Farm Management Specialist for Iowa State University Extension said, “The Mexicans need our products. They have only one port that can handle panamax ship which would be used to import ag commodities from South America. Products from the U.S. are shipped via rail giving us a much more competitive advantage in transportation costs.

“I also believe there are other potential importers of ag commodities who may become active in the market if changes in the NAFTA agreement occurs.”

Johnson also stated the agricultural economy is subject to five to seven year cycles. “We are at the bottom of the trough and expect for commodity prices to stabilize. However, we are just one drought away from $4.50 corn and $12 soybeans.”

He also said, “I think 20% of the farmers are in trouble, 5% are on the ropes but the others, even though they are operating at break even or at a loss, have enough working capital to make it for quite a while.”

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