I don’t know exactly when it happened, but recent political movements clearly indicate that perceptions around the idea of globalization have changed. Not just in the U.S. with the election of Donald Trump, but also with Britain’s Brexit, and Marine Le Pen’s announcement to run for France’s president in April. It is also being manifest in China by President Xi, who has moved toward nationalistic policies. Make no mistake, the world is changing. Participants in global trade must adjust and prepare accordingly.
First it is important to define these terms. Globalization is the movement of goods and services across national borders. It has flourished for centuries, but has at times faced similar pushback to what is occurring today. Globalism is the belief that globalization is a good thing. Nationalism is the ideology that focuses policies and efforts on national priorities. It is associated with patriotism, loyalty, and sometimes xenophobia. It is a complex and broad ideology, but has been used to define these recent global political movements.
These seismic movements are not driven by leadership, but by majorities of individual voters. As was popular in the hit-reality TV show Survivor, “The tribe has spoken”. Individuals in the U.S. and Europe have voted for significant changes for a variety of reasons. But what about China, a communist nation? It is different there. The masses have not spoken, but a strong, dynamic reformer, Xi Jinping has turned China’s policies more national-istic. From stricter censorship, to extraterritoriality (expanding geographic presence), to anti-foreignism (restrictions on NGO offices in China, falling China-derived foreign revenues), China’s president has shown nationalist policies.
So what about global protein trade? First of all, in the current state of flux, it is dangerous to assume that one knows what is deemed unknowable. No one knows what consequences will unfold under the new U.S. President Trump and his majority in congress. We do know he appears fully committed to “build the wall” on the U.S. / Mexico border. He appears committed to punish U.S. companies manufacturing in Mexico and China (possibly through import tariffs). And he appears committed to strengthen the U.S. military as well as re-define global military agreements. These moves could very well have negative impacts on U.S. agriculture exports, at least in the short term as these agriculture issues become chips in broad negotiations. The real question will be if negotiations bring improved U.S. agriculture market access overseas.
Final thoughts to consider: First, global agriculture trade = global FOOD trade. Some key importing nations do not have the capacity to offset lost imports. China imports 85% of their soybean needs; Japan imports approximately 50% of their national caloric intake. Food imports are not financial services, or automobiles (both of which do not sustain life and may be made domestically). In that sense global agriculture trade may be more durable in stormy political weather. Second, (however) some agriculture products are perishable. Perishability = volatility. Once the meat or produce is boxed, the clock is ticking. Grains, including corn, wheat, rice, and soy-beans have much longer shelf life. But meat, poultry, and dairy products have a short window. Plan accordingly for more volatility. Producer strategies include owning more puts. Cold storage may increase globally.
But buckle up. 2017 will bring new volatility and hopefully new opportunities. And don’t forget, with rising U.S. meat and poultry supplies, 2017 also brings a sharper focus on exports.