Since Biden was elected, prices for farm products have jumped. The markets have been good. Reason in the White House helps. – The South Dakota Standard
The followers of this space know that I was shamelessly bullish on the outlook for farm prices when Biden was elected. A year later the markets are up, after playing the way I thought (OK, I was hoping) they would. Was the Biden administration the cause? Well, he’s been a factor, but the whole economy, not just our agricultural sector, is emerging from the deep recession of 2020.
Still, some credit is due. Biden has done American farmers a lot of good by toning down the warmongering his predecessor Donald Trump misused in our trade relations, especially with China (pictured above in an image of American soybeans loading for shipment to China, as posted on the splash247.com website).
The recent rally in commodities has likely been politically favorable for Biden, but it’s a short-term snapshot. A longer-term view might be a better way to gauge Biden’s impact on commodity prices. Rather than using last year’s ultra-low benchmarks, I’d rather compare recent prices to what they were before Trump’s silly trade wars and the image-distorting pandemic of agricultural marketing. From this perspective, we can see that a lot of damage was repaired during the Biden administration. Checking the charts, the comparisons are actually mind-blowing. But now compared to January 2018 is up 73%. Soybeans during the same period are up 41%. Wheat during this section increased by 83%. You have to go back a decade to the Obama administration to find the last time prices were at these levels.
Should Biden get most of the credit for this remarkable upward reversal in farm prices? Well, as a Biden supporter I’m tempted to say yes, but as a decade-long commodities and options trader in Chicago, followed by another decade of producing and brokering agricultural products here in South Dakota, I’m realistic enough to know that markets are apolitical and ultimately change in response to supply and demand.
So I give Biden some, but not all, credit, not so much for his policies, which have yet to be formulated, but for bringing a more rational and realistic approach to trade than his predecessor. Commercial channels are functioning normally. There are no major concerns about Trump’s trade-related pop-offs, which have regularly caused exporters and traders to wonder nervously, “What’s next?” You don’t hear Joe Biden yelling and screaming about trade wars. You don’t see Biden launching crises that materialize in self-defeating unilateral tariffs. You don’t hear him claiming wins (remember the fiasco known as Phase One?) who turned out to be losers instead.
This is all well and good, of course, but “not being Trump” is not exactly a substitute for policy making and implementation.
Biden was not as proactive in shaping trade strategies and policies as many of us expected. Yes, he recently made a small but important decision that has worked quite well. His recent removal of tariffs on the European Union’s aluminum and steel exports has been well received by American manufacturers, including an iconic South Dakota company called Harley-Davidson, as well as American whiskey distillers.
It could be a harbinger of better things to come, but while a small step like this may be, Biden has yet to announce some major business initiatives. The Hill calls its policy “confuses.” the Joseph Glauber of the American Enterprise Institute notes that “trade policy under Biden appears to be a softer, milder version of trade policy under Trump.” These are reasonable assessments given that Biden has yet to make clear and specific statements about his approach to trading. I imagine Biden’s focus on his national agenda is probably consuming most of the political talk in the White House these days.
But as understandable as Biden’s fixation on national priorities is, export-dependent industries like agriculture are ready for advice. For now, Biden likely enjoys political leeway from the agricultural sector, which benefits from attractive prices and can at least operate on the trade front as part of a “smoother, softer” approach than that adopted by the Trump administration.
But Biden will only get some political mileage from being rational compared to his predecessor. His character of Mr. Nice Guy will soon wear out. Given multi-billion dollar impact that trade has on our economy, it is reasonable to expect visible progress on that front. Many questions remain unanswered, in particular how its policy will approach environmental and human rights issues.
One thing is certain. Biden will have a lot of goodwill from a financially flourishing agricultural sector for him if he can continue to steer him away from the hellish conditions created by Trump’s trade policy. But given the volatility of commodity markets, this goodwill may evaporate if prices fall for a while. Biden should start moving now.
John Tsitrian is a Black Hills businessman and writer. He was a weekly columnist for the Rapid City Journal for twenty years. His articles and commentaries have also appeared in The Los Angeles Times, The Denver Post, and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radio in Vietnam.