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This year, the grains are taking on an extra dose of volatility from political influences, particularly from uncertainties involving trade policy, government aid programs and currency exchange rates.

Trade is certainly the feature topic for markets in 2018. Starting off the year with a proclamation of broad-sweeping steel and aluminum tariffs, President Donald Trump put the world on notice that he was ready to tackle large U.S. current account deficits that he alleges to be a product of unfair trade deals.

U.S. participation in the Trans-Pacific Partnership was withdrawn and the North American Free Trade Agreement essentially torn up. Then, new tariffs were levied against the Chinese, first against $50 billion of imports and followed by plans to tax another $200 billion and possibly $267 billion worth of Chinese goods.

Countries like Japan, New Zealand and Australia are moving forward to ratify a TPP trade pact without U.S. involvement. The White House has signaled its intention to strike bilateral trade agreements with most of the original parties.

Progress has been made on the development of new trade terms with Canada and Mexico, but Congress will have to step up its involvement in the process and ratify a new bill.

Chinese trade remains the wildcard. The U.S. alleges export dumping and theft of intellectual property on China while China has its heels dug in because of what officials from the People’s Republic argue is the U.S. negotiating in bad faith.

U.S. agriculture can stand to benefit if the various trade policy talks reduce barriers to entry that many export products from the sector currently face. Progress looks evident on trade relations with our North American neighbors as well as with the European Union and Japan. But, agricultural prices are not likely to stabilize until the squabble with China is resolved.

The White House and USDA unveiled a $12 billion aid program to provide relief to farmers impacted by Chinese trade tariffs. Soybeans earned a payment rate of $1.65 per bushel on half of this year’s production, wheat 14 cents per bushel, corn just a penny. Expectations are for a second tranche of aid payments to be paid in December.

Tariff relief payments are separate from the benefits provided by the new farm bill that is currently being debated. The farm bill will be relied on by farmers that may see their income drop to a 10-year low this season.

If changing trade policies and new crop programs are not cause enough for consternation in the grain market, wild currency swings round out the list of impactful political influences to keep track of. Floundering emerging market currencies, including those in the hands of our big grain trade competitors Brazil and Argentina, put U.S. exports at a price disadvantage.

Global political uncertainty puts extra pressure a time when farmers are working to haul in record-yielding corn and soybean crops. If bumper harvests do one thing, it will be to provide farmers with plenty of grain to sell at improved prices should the political fog clear to reveal what we know can be a phenomenal demand base.

Camp is the risk management specialist for AgriVisor. This commentary appeared in Wisconsin Farm Bureau's Rural Route Oct./Nov.publication.

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