Quarterly US Rural Economic Review, June 2018: Trade War Rhetoric Shifts to Reality
- The risk of an escalating trade war is the greatest threat to the U.S. and agricultural economies in the near term. Nearly 70 percent of U.S. agricultural exports are sold to destinations that are under active negotiations or embroiled in trade disputes.
- The U.S. corn and soybean crops are in great condition entering July. Corn exports are well above normal while soybean exports have lagged from year-ago levels. Prices are under pressure from both favorable growing conditions and impending China tariffs.
- Domestic meat production is on the rise. In 2018, red meat output is expected to increase 3-4 percent and poultry production is forecast to rise 1.5 percent. The pork sector is at greatest of risk of trade impacts as the industry expands and tariffs are set to increase in Mexico and China.
- The dairy industry has stabilized and shown some recent strength. Production gains have slowed and exports have increased. The EU, however, has inked free trade deals that could limit U.S. export growth. The EU-Mexico deal and Mexico’s impending July tariff increase on U.S. dairy both pose considerable risk.
- Drought conditions have expanded across the Southwest, with over half of California now in moderate to severe drought. Most specialty crops also now face rising trade barriers in China and Mexico which threaten future sales growth.
- Implementation of the U.S. Department of Energy’s proposal to subsidize uneconomic coal and nuclear units will result in higher energy bills for consumers and curtail investments particularly in wholesale energy markets where capacity prices will experience downward pressure.
- The FCC will be auctioning off $1.98 billion of CAF-II funds in July to carriers that agree to buildout broadband in unserved and underserved rural areas. Dozens of companies are expected to participate in the multi-round reverse auction.
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