Farmers are always facing uncertainty. As it stands now, many South Dakota farmers are experiencing moderate to severe drought.
And, what does an administrative change in the White House along with the many possible policy changes mean for the state's producers?
Joining us to share thoughts on what a Biden Administration looks like for South Dakota farmers is Kevin McNew, Chief Economist with the Farmers Business Network.
Lori Walsh:
Welcome back to In the Moment. I'm Lori Walsh. Farmers are always facing uncertainty. As it stands now, many South Dakota farmers are experiencing moderate to severe drought. And what does it administrative change in the White House, along with the many possible policy changes mean for the state's producers? Joining us to share thoughts on what a Biden administration looks like for South Dakota farmers, we have Kevin McNew. He's chief economist with the Farmers Business Network. Kevin, welcome back to In the Moment. Thanks for being here.
Kevin McNew:
You bet. Good to be here, Lori.
Lori Walsh:
So much happening in 2020, and then also possibly more changes on the way. Tell us a little bit, how much of a difference does it make when America shifts to a new presidential administration? Is it a big change? Is it smaller changes? What is the general rule for that?
Kevin McNew:
Yeah, I think in general, Lori, farmers are pretty immune to overall changes in the White House, who's controlling the levers. There's some pretty fundamental differences between what President Trump did and what President-Elect Biden has signaled he will do. And so I think there are some reasonable expectations that there'll be differences going forward. Some of them I think are very positive for farmers and I think there's some new changes, especially as it relates to climate and the role that the USDA may play in helping subsidize sustainable ag practices.
Lori Walsh:
All right. So are we looking, and I want to get into some of the specifics here in a minute, but do we know what we know about President-Elect Joe Biden because he was vice-president for President Obama? Or is it a significant change for farmers who remember certain things from the Obama administration? Is it going to be more like we're going back to that, or is it forward to something entirely different with Joe Biden?
Kevin McNew:
I think it's forward, and this is my own conjecture, Lori. But he's signaled pretty clearly that climate change is a big priority of his. Obviously COVID is first and foremost, and his response to COVID will be first and foremost, but I think a second order effect will be what he does around climate change. And he's signaled a couple of things that are important for agriculture. One, he views agriculture as a partner around this, specifically that farmers have the ability through production practices to sequester carbon and change the climate calculus, if you will. And so I do think the administration, the new administration would likely put in place some new policies that encourage cover crops and different practices that sequester carbon. And what those will be yet, we don't know, but he's certainly signaled that in his election run. So I think that's probably first and foremost what we can expect from a Biden administration as it relates to climate.
Lori Walsh:
Are there ways to prepare for that? Does a producer just wait for new policies? How do you get ahead of some of those things and say, "These are what we need to do to be ready to take advantage of potential incentives," for example.
Kevin McNew:
Right. Yeah. It's obviously a moving target. You have to be defined. What I will say is, the market has already started to begun doing these types of incentive structures as it is. At Farmers Business Network we have a very active regenerative ag program where we do work with private companies to adopt sustainable practices. And so there's markets in place where farmers are paid to take on certain production practices. So it's not something brand new. Many farmers are already participating or they're aware of it. So I think it's just going to be a question of what will the Biden administration put in play to further accelerate that adoption. And so, like I said, you have to be defined, but in many cases, farmers are already doing some of these practices. They know the benefits of cover crops, they know the benefits of no till. And so I think it's just going to be a question of what will the Biden administration put forward.
Lori Walsh:
Right. And I was wondering, do you, from your vantage point, see some of those emerging technologies or innovations. I think most farmers and producers in South Dakota have a sense of cover crops in no till and some of these other practices, I should say. But what's around the corner? What have we not thought of yet?
Kevin McNew:
That's always agriculture, right Lori? We're always looking to make more bushels on less inputs and less dollars. So, I think things that are just more efficient. Using less chemicals, using less inputs will always be a driving force for agriculture to try and squeeze as much production as they can out of that acre of land. And so companies and government are actively always working on that. The other thing I'd say when it comes to technology, and back to the climate change issue, I think in reading Biden's directives around climate, one of the things he mentioned specifically is renewable fuels. And certainly he does give a nod to the renewable fuel sector, and certainly that's very important to South Dakota where we have a lot of ethanol plants.
Kevin McNew:
And I think a couple of things would probably come out of this. One is probably a more ag friendly, renewable fuels policy going forward. I won't say there'll be a huge growth potential in corn based ethanol, but certainly advanced biofuels are targeted. And I think things like the Small Refiner Act that was put in play in the last administration may be off the table as we move forward. So I do think that it's going to be a situation where we doable fuels will be probably more in favor with this administration going forward.
Lori Walsh:
Sure. You mentioned the Biden administration's priority for the pandemic. And certainly we're also in the Trump administration now rolling out operation warp speed and the race for a vaccine and distribution of that. We experienced these supply chain problems, we've experienced problems with global markets because of the pandemic. Agriculture is often about scale and the demand for food across the globe. How is the pandemic changing farm economics right now in ways that we're just getting our arms around?
Kevin McNew:
Yeah. Good question. It's really been a 180 degree turn since March and April when COVID hit the US and it became a serious crisis. There was a lot of friction in the supply chain. We saw a lot of plant closures, especially around meat processing. I think we're sort of behind that, and obviously we had this second wave in front of us that we're still trying to figure out, but I think hopefully a lot of the major hiccups are behind us.
Kevin McNew:
I think what's most exciting as we see grain prices really escalate is we now have a really big opportunity with China. And so their appetite is only just growing more and more strong every year. And especially, we know it's always been the case for soybeans, and we have that market back at our disposal to export into, but we're also seeing now just how much demand they have for corn.
And so basically in the last six months or so, we started to realize as an economy in agriculture, that China is running at a fairly significant deficit. And so that's starting to show up in terms of corn sales going into China, where that was just not the case, unless we go back to the nineties when there was some major corn selling going to China. But they are now at a point where they not only need to import a lot of soybeans, but they also need to import a lot of corn. And so I see a lot of positive tailwinds for farmers here for the first time in several years.
Lori Walsh:
Okay. So I'm just going to ask the question, because I cannot find frozen corn in the city of Sioux Galls for my Thanksgiving dinner. I can find canned corn. We can make substitutes, but at the same time, I guess that was one of the things standing here in South Dakota, wondering why can't I get corn all of a sudden? There must've been some kind of rush on it this weekend. I don't know.
Kevin McNew:
Yeah. And I think you're right. Grocery stores are not as fully stocked as they usually are. And so we are seeing some supply disruptions and hiccups around meat and around, like you said, produce. In the world of feed grains and oil seeds, which most of our farmers in the Midwest are growing, it's really full steam ahead. We have such a huge opportunity now with China, as I said, in a very different US dollar situation where our dollar is a lot weaker, and that looks to be the case going forward. So that actually changes the paradigm a lot. So for the farmers in South Dakota that grow corn and beans, and even to some extent, wheat, I think there's a lot of good times ahead.
Lori Walsh:
All right. So how will a Biden administration deal with China in a way that's different than the Trump administration? What can we anticipate there?
Kevin McNew:
Right. I think, in some sense, what might surprise our listeners here is that Trump and Biden are not too philosophically different around what they view as China's problems. And that is intellectual property transfer, and also the subsidizing of their private companies for production. And so Biden is very much a pro-labor guy. So he doesn't like the Chinese practices. I think where the difference lies between the two administrations is how they will choose to deal with that. Biden I think is more of a coalition type of builder. He'll resort and rely on WTO and other organizations that are more multilateral in nature. And so I don't see him going head to head with China. I think he will probably hold tough on China, but I don't think we're going to have a repeat of the trade wars. And so I don't think it's something that farmers have to worry about at this junction.
Lori Walsh:
So putting two things together that we've already talked about, this notion of a Biden administrations leaning into climate incentives and incentives for regenerative agriculture, and then this perhaps greater strength of the American export, especially regarding China and maybe even something like corn or wheat, do those conflict with each other? When we talk about the opportunity to export and the demand for exports, and then also the call for regenerative practices, do they conflict or do they work hand in hand?
Kevin McNew:
Yeah, I think the regenerative ag practices can be done as a second order effect, I think what we've seen from an agronomic standpoint, and this is where the science is both in the public and private sector have really tried to be looking into this issue, is you're not necessarily having to give up huge amounts of yield to take on these regenerative ag practices like cover crops. Cover crops provide an agronomic benefit by rebuilding soil content. And so I think we don't have to trade off one for the other so dramatically. It's not to say there wouldn't be some minor trade-offs, but I think we can beat both goals pretty succinctly in agriculture.
So I think that's what gives me a lot of optimism is I think there'll be a clear vision around climate change and how agriculture can be a player in that. And also, I think we have this huge runway in front of us with China as a wide open market for us to feasibly export into, and really see the benefits of that in rural America.
Lori Walsh:
For farmers and producers to really move forward toward that, how important is it to, around the world, deal with the pandemic and get vaccine distribution and mitigation efforts and get economies turning back up to speed? How important is fighting the virus to helping farmers?
Kevin McNew:
Yeah, it's important to every industry to some extent, and agriculture's not immune. We touched on the effects on the meat supply chain, for example. When we had the seizing up of meat processing, it led to a collapse in the live stock prices. And so we can talk about China, but China is buying those grain and oil seed products because they need meat. And so it's all interrelated. And so we do need a remedy for COVID. We need to get back to some semblance of normal here, and agriculture's not immune in that. We've fared fairly well, especially in the last few months, but if this were to persist and really cause us supply chain disruptions again, it would be problematic for agriculture.
Lori Walsh:
Do you see any challenges to the speed with which the transition from the Trump administration to the Biden administration might happen? Does that matter?
Kevin McNew:
Yeah, that's a little bit beyond me. What I'd say for agriculture is we'll know in the next ... Either this week or possibly next week, who he will likely to appoint for USDA Ag Secretary. I don't think that's a necessarily controversial post, although there will be a lot of interest in it, but I think it will probably be something that climate change and the policies that he wants to put forward there will be rolled out as he moves the transition forward. But I don't think it's as imperative as some of the other issues that are top of shelf for the US right now, which is the economy and COVID, obviously.
Lori Walsh:
Yeah. Kevin McNew is with the Farmers Business Network. He's the chief economist there. Kevin, always a pleasure to talk to you, and I'm sure we'll be talking again as we see some of those appointments and the policy changes in the days and weeks add. Thanks.
Kevin McNew:
Thank you, Lori.