Trade tariffs based on whims complicate economic outlooks

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At the start of his farm economic outlook for Missouri Ag Lenders Conference, Scott Brown said: Agriculture outlooks get harder when things are in flux.

He cited volatility in many issues. You probably know a couple facing rural Missouri this spring.

Brown, a long-time University of Missouri livestock economist, sorts out uncertainties facing livestock farmers.

He’s built a reputation tracking prices. He still responds to more requests for his talks than anyone on-campus. This week, he talked to a tough group: Ag Lenders. They lay out money to keep Missouri farms going, year to year. The money people flock to this meeting.

A good loan or bad one depends on economic outlooks.

Scott didn’t use his normal disclaimer: “I’m better at telling what happened last year than telling what will happen next year.” The year ahead is his job.

Scott and I benefited from our common mentor, Abner Womack, long-time MU ag economist. He taught us both. Womack invented economic computer modeling in ag economics at USDA in Washington, D.C. He grasped early need for complex computer analysis of farm policy.

The impact down on the farm starts in what grows and is consumed around the world. Womack was ahead of his time. His USDA bosses weren’t ready to think that big and fast. So Womack went looking for a new home. After interviews at several Land Grant Universities he found a home at MU. Lucky for us.

He built a group of talented economists around him. They became the Food and Agricultural Policy Research Institute or FAPRI.

Soon, their accurate outlooks from his computer model were sought in Washington. USDA couldn’t provide what Congress needed to rewrite the Farm Bill every four years or so. Womack and his helpers went forth.

This is where Scott and I first worked together. He provided livestock outlooks. I made news releases written in plain English, not economic jargon. Womack aided us both. My job translated their findings in terms understood by farmers and legislators.

The huge baseline book and brief news stories became sought.

That scene has changed. Laws aren’t based as much on economic facts anymore. Leaders can’t be bothered with tradition, policy or dollars. It’s politics.

Scott doesn’t mention that much by name. He’s politically correct.

One huge issue adding economic uncertainty is loose approach to applying tariffs. Our president loves tariffs and trade wars. Proposed tariffs on products from Mexico left the U.S. economy in shock from one tweet late at night. No way to predict that.

Scott’s comments based on tariffs aimed at Mexico, our No.1 trading partner, were imprecise. (Even computer models can’t shift and change as fast as whims from our head policy maker in charge.)

In fact, policy whim changed again, drastically, about 24 hours after Scott’s talk. No, wait! There’s no tariff after all.

There are plenty of other uncertainties. The economist laid those out for bankers to consider. Farmers have to think uncertainty as well. They vary.

Here are top concerns in livestock as told by Scott:

1. Meat supplies are growing and plentiful. (Too much lowers prices.)

2. Disease issues critical. (Asian Swine Flu cuts supply, boosts prices.)

3. Weather a key driver in livestock outlook. (Think drought, then floods.)

4. Domestic demand stays strong. (Look at a drop in jobs in the last report)

5. Trade deals and tariffs drive exports. (See lost soybean exports to China.)

In spite of all those, he gave a strong outlook for meats. Well, strong with ifs.

At the end of his talk, Scott’s slide showed the long-term U.S. livestock farm income. Now, it’s just below $90 billion. From there an upward trend line ends at just above $90 billion in 2028. It’s optimistic. But, baselines we took to D.C. always included a note that all models assume normal weather. Who knows that? Economists can’t control the weather.

Send your take on outlooks to duanedailey7@gmail.com.

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