challenges-tax-nafta-farmbill Logan Hawkes

Three major, potentially devastating challenges of U.S. Agriculture in coming months

To sum it up, there is an air of uncertainty over three primary (and major) issues facing farmers and livestock producers across the country: agricultural trade, tax reform and the new farm bill. Let's tackle them one at a time.

With the end of the year in sight and 2018 looming on the horizon, U.S. agriculture has a lot on its plate besides the usual equipment maintenance, seed, chemical, and other material purchases, plus closing out the books for the current year—much more. And maybe more than the agricultural world bargained for or anticipated.

No doubt about it, when all is said and done, 2017-2018 could be one of the most trying and difficult years for agriculture in a long time, some might say harder, perhaps, than the Dust Bowl days, and maybe rivaling the days of the Great Depression.

If you're wondering why, it's because of a multitude of major issues are hanging in the balance, all of which have the potential of causing a great deal of trouble—or a great deal of relief—for U.S. farmers and livestock producers.

To sum it up, there is an air of uncertainty over three primary (and major) issues facing farmers and livestock producers across the country: agricultural trade, tax reform and the new farm bill. Let's tackle them one at a time.

 AGRICULTURE TRADE

With the failure of a much anticipated Trans-Pacific Partnership (TPP) and the potential for a U.S. withdrawal from the North American Free Trade Agreement (NAFTA), the question of whether a robust global market for agricultural commodities and other food products will be as robust for U.S. producers. On top of those agreements, there has been talk about the future of other trade relations, including a more open market in Cuba, which many believed could have opened up more opportunities for U.S. agriculture.

Then there are potential problems with the current administration's demand on trade balance with China, which could have a positive or negative impact on commodities headed across the Pacific. In addition, the White House has been openly critical of the trade agreement with Far East trading partner South Korea, another potential stumbling block for U.S. producers.

While most agree that the 23-year-old tri-lateral NAFTA trade deal needed some updating, the idea that U.S. free trade with Mexico and Canada could be at risk has most farmers uneasy about the potential for upcoming and serious roadblocks in their marketing strategies.

Even if current NAFTA trade negotiations were to end on a positive note, analysts say Mexico's aggressive posture in securing alternate trade deals in recent months may impact deals they currently have with U.S. suppliers. Mexican Economic Minister Ildefonso Guajardo announced this week he believes Mexico is nearing a close to a trade deal with the European Union, possibly as early as the end of the month.

"There is a possibility, but not a guarantee" of a Mexico-European Union deal, Guajardo told Reuters during a recent conference in Argentina.

And speaking of Argentina, Mexico has already purchased commodities from the South American country since NAFTA renegotiations began in August. Mexico has also talked with several other nations, including Cuba, in what appears to be a clear message to Washington that they are not willing to be strong-armed by the Trump White House.

It remains unclear whether a threat of withdrawing from the trade agreement with Mexico and Canada is real or simply political rhetoric designed to pressure Mexican and Canadian trade officials into accepting Trump-sponsored changes. Some analysts have speculated that the introduction of a five-year Sunset Clause was designed to turn up the heat on the Canadian and Mexican trade representatives, a tactic that has been criticized by many who believe such a strategy could be counterproductive.

But according to a top U.S. Department of Agriculture official, farmers need a backup plan if the U.S. decides to exit the agreement, a development he termed “a real possibility.”

Ted McKinney, USDA undersecretary for trade and foreign agricultural affairs said this week that he "would advise farmers to consider a contingency" should the renegotiating talks reach an impasse.

Kansas Republican Senators Pat Roberts and Jerry Moran have warned the White House that losing the tariff-free trade opportunities created by NAFTA would mean U.S. exporters would have to compete to sell in markets they’ve dominated under the existing agreement. Moran said that would be a devastating development for all U.S. farmers and livestock producers.

"By walking away, it strengthens our competitors, so when the market does come back all of sudden we have to compete with them," affirmed Ryan Flickner, senior director of the Kansas Farm Bureau, who has joined a number of Midwestern farm groups in petitioning the Trump Administration to remain in the trilateral trade deal.

In Texas, where agriculture and other industries have the most to lose if the U.S. withdraws from free and open trade with Mexico, it's a major concern for many groups. Manufacturers and business leaders in Texas are also concerned that NAFTA's demise would cost the state excessive gains made since the historical agreement first went into effect.

According to the Chicago Tribune, the Trade Leadership Coalition, a separate industry-funded group headed by a former Caterpillar lobbyist, last week began airing pro-NAFTA advertisements in nine states that Trump won in 2016. The 60-second television ads aired in Texas, Tennessee, Nebraska, South Dakota, Mississippi, Michigan, Iowa and Indiana.

 TAX CUTS AND JOBS ACT

While the eventual result of NAFTA renegotiation efforts represents a major challenge to U.S. agriculture, the issue of trade will share the spotlight with other major concerns that threaten to affect farmers and other agricultural producers across the United States.

The so-called tax reform in the Tax Cuts and Jobs Act that is being rushed through Congress is another hurdle that farmers face, so says a number of farm support groups. Even individual farmers are taking note of the potential risks agriculture faces if the act makes it as far as the White House and is signed by President Trump.

This week, Ellen Linderman, a farmer in North Dakota, sent a letter to an upper Midwest newspaper expressing her concerns over the U.S. House and Senate reconciled tax bill that Republicans hope to adopt before the Christmas break.

"As a farmer, I am very concerned about the so-called tax reform in the Tax Cuts and Jobs Act that was arranged behind closed doors and hurriedly passed by the U.S. Senate and House of Representatives," she said in an open letter published this week by Inforum Newspaper in Fargo. "The main features of these two versions of the bill are huge permanent tax breaks for corporations and the wealthiest people on the planet."

Linderman charges that the bill represents huge and permanent tax breaks for corporations and the wealthy while providing only modest and temporary tax breaks for middle-income taxpayers, and she accuses Congress of hashing out the details of the legislation in closed-door conference meetings, what Linderman charges is a clear message they didn't want to tip their hand on all that is included in the legislation, which she says provides major pitfalls for U.S. farmers.

"Supporters of this tax mess don't seem to understand the effects it will have on family farmers and ranchers. Independent nonpartisan analysis says it will add $1.5 trillion to the national debt. A statutory provision called PAYGO requires automatic cuts to certain programs to offset increases in deficit spending. The size of this deficit could mean the total elimination of the funding for Agriculture Risk Coverage, Price Loss Coverage, disaster assistance programs, administrative costs for crop insurance delivery and many other programs," she writes.

Perhaps worst of all, she said she believes PAYGO rules will hamper and may prevent passage of a new Farm Bill in 2018.

As of this writing, it remains unclear what the full impact the tax reform act will have on Americans-at-large. The next step is for additional independent analysis of the bill. Those weighing in so far have not provided a great deal of positive impact.

According to the Congressional Budget Office’s initial analysis of the Senate tax bill, the cuts would add over $1.41 trillion to the deficit by 2027. And in spite of some Republicans that wanted safeguards that would trigger automatic tax increases or spending cuts if economic growth fails to cover the cost, the Senate Parliamentarian ruled such safeguards would not be allowed.

According to Bloomberg Politics, as of Wednesday afternoon, Republican Senator Susan Collins of Maine voted to approve the Senate tax bill "after [Senate Majority Leader Mitch] McConnell had committed to support the passage of two pieces of legislation before the end of the year to mitigate the cost of health insurance premiums." Collins has said she’ll wait to see the final version of the tax legislation before deciding how to cast her final vote on the reconciled version of the legislation.

Bloomberg reported that Republican Senator "Bob Corker of Tennessee, the only Republican to vote no for the tax bill,” is still undecided on his final vote. Corker said on Wednesday his concerns about tax cuts adding to the deficit have not yet been addressed.

The Senate cannot pass the legislation if more than two Republican Senators fail to vote in favor of passage.

As of Thursday, Republican Senator John McCain remained hospitalized at Walter Reed Medical Center in Maryland. It was uncertain if he would return to the Senate floor soon enough to vote on the final vote, or which way he might vote if he does. McConnell said this week he hopes to get a final Senate voted on the reconciled bill as early as Monday, Dec. 18.

 THE 2018 FARM BILL

The third and potentially the greatest challenge facing U.S. agriculture in the coming year is the passage of the 2018 Farm Bill and how that bill will play out in terms of a safety net for farmers who have been struggling with low prices and a number of major disasters over the last year, including hurricanes and wildfires.

The Farm Bill in its final version will no doubt be greatly affected by both the conclusion of NAFTA renegotiation efforts and by the fine print of the Tax Cuts and Jobs Act, or tax reform legislation currently being proposed by Congress and the White House. Until the details of those major hurdles are known, all bets are off on an effective Farm Bill.

In spite of that, work has been started on the next Farm Bill and lawmakers are making an effort to address the needs of agriculture, though there seems to be a major division on a number of issues.

But farmers seem united that each of the challenges facing lawmakers in the days, weeks and months ahead will greatly affect their ability to farm in the years ahead, and no one seems confident enough to predict which way the cookie will crumble.

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