Trump immigration actions move grain markets

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1973 oil embargo-triggered gasoline shortage
(1973 Photo: U.S. EPA/ David Falconer, Photographer)

Grain market commentary by Marlin Clark

Last summer marked 46 years in the grain business for me. It is hard to believe. Some days, I still feel 35; most days, it is, “Oh, to be 60 again!”

After all these years, there are still surprises. Yesterday I asked Paxton, in our Ashland office, what was wrong with the grain market. Corn was down a nickel, soybeans were off most of 30 cents. His answer hadn’t occurred to me. It was all because of worry about President Trump’s immigration action.

That was a new one, I thought. When did presidential politics affect the price of grain?

This morning it occurred to me that I had seen this before. That’s what old age does for you. It’s a gray beard thing.

So, President Trump puts a moratorium on immigration from some Muslim countries, Chris Matthews gets another funny feeling down his leg, and the cable talk shows make it sound like we have an idiot at the helm, even though much of the country is clapping.

Knee-jerk reactions

What does this have to do with grain prices? Uncertainty is at the heart of knee-jerk reactions on the Chicago Board of Trade.

Higher prices come from smaller supply, or production worries, or unanticipated demand. Lower prices sometimes come just because traders look around and wonder if they don’t know as much as they did.

What if our trading relationships are strained by political backlash or talk of trade war, or even talk of real war? What if oil prices from Muslim countries are affected? What if there are unforeseen events that effect prices in ways we can’t even imagine?

I fear, therefore, I trade lower.

Today, Tuesday, Jan. 31, we have awakened to no new news. The hundred and so people who were detained entering the country were passed in fairly quickly as officials got the word how to handle green card holders. The thousands who were not detained went un-noted by pundits. The market has taken a sigh of relief as it waits for real news.

Seen it before

This morning I was thinking that we have never seen something like this before. Then, I remembered that we had.

First was 1973. OPEC started us off with an oil embargo, which was actually a move to get prices from $3 a barrel to just over $5. Imagine that, now that we have seen $105! The result was a panic here, and a reaction by President Richard Nixon to usher in price controls.

This action all but guaranteed shortages from hoarding, and we got to witness the lines at the pumps that all of us old enough will never forget. I remember trying to vacation in Florida with alternate-day gas at the pump — that is, you could only buy gas every other day.

The Arabs put the embargo on to punish us for sending arms to Israel to help them in the Yom Kippur War.

Later that year came the embargo that hurt farmers more — the Nixon soybean embargo. Faced with a decline in production, our president decided to stop shipments of soybeans to Japan. The Japanese, faced with a food shortage, countered by taking a billion dollars to Brazil and starting a soybean industry that would compete with us. Now South America produces more soybeans than North America.

Not having learned any lessons from this disaster, President Jimmy Carter followed in 1980 by using the grain trade as a weapon in the political wars. Unhappy with the Russian war in Afghanistan and stung by “the Great Grain Robbery” whereby clever Soviet grain buyers quickly bought a huge supply of wheat from us, driving up the price, Carter embargoed the sale of ag products to the Soviets.

Our government promised that the American farmer would not suffer from this, but I remember it as the biggest reason that I am not now farming. Our prices crashed from the prices the Soviets had helped establish. We didn’t see prices like that again until the Chernobyl nuclear disaster in 1986.

Trump market

Now comes the Trump market. The stop of the TPP deal caused a reaction mostly on the West Coast, but the immigration action seems to have hit the whole nation of grain prices. So far, it is a one-day wonder, as prices are steady this Tuesday morning, and three cents better on the beans.

The biggest reaction seems to be in Washington, where the pols are shocked, shocked that a man would keep his campaign promises.

 

 

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