Trump made a hash of things before the virus

Ag markets tank along with stock market due to government incompetence

EDITOR'S NOTEBOOK

BY ART CULLEN

Monday dawned dark under freezing rain with tanking stock and commodity markets driven over the edge by coronavirus panic. Stock trading was halted on a 7% drop. Oil prices are down 20% with a Saudi-Russian production war. Corn was down 9¢ per bushel early, soybeans were down 17¢ and hogs were off $1.40. Ethanol prices dropped 3%, lagging the oil plunge, propped up by government blending orders under assault in the courts.

“It’s a bloodbath,” my old farmer friend said, eyes glued to the computer screen.

“It’s gonna mess with everybody,” said Iowa State University economist Dave Swenson, who studies corn, ethanol, pork and trade.

Oil and ethanol markets were weak before the virus. Likewise other commodities because of trade wars that will permanently shift the ag supply chain for China to Brazil and Argentina, and away from the United States. Soybean prices traded sideways to lower when President Trump announced his Phase One trade deal with China — nobody believed him or China that ag trade would double. It is unclear whether China, which owns so much of our debt, has cash to buy enough of our pork. The markets have suggested they do not. They also suggest that the Chinese are in no position to rebuild their swine herd cut in half by another epidemic: African swine flu.

Before coronavirus, there were ample signs of trouble in Midwest manufacturing with growing notices of layoffs, almost all of it precipitated by trade conflicts initiated by the Trump Administration.

The economy was a tinderbox waiting for a match. Strike up the pandemic.

There is nothing fundamentally to stop a disaster in what was an overheated stock market completely divorced by irrational exuberance from the reality of ag, energy and manufacturing weakness. The federal government appears incompetent as the President golfs, and tests for the virus are not widely available. American citizens are being held captive on cruise ships while federal officials dither on how to care for them.

The markets will continue to plunge so long as the government is not able to give an accurate rendition on how severe the spread is, how it will affect supply chains, and what happens in the aftermath.

Farmers who have endured years of declining corn and soybean prices are doing okay thanks to two huge trade dispute bailouts totaling some $30 billion. President Trump suggested another such payment will be made (no doubt in late October, just before the election). But that does not cure the long-term, structural problems plaguing the Midwest economy that has not fully recovered from the Great Recession of 2008.

Trump got elected because things weren’t great in key Midwestern swing states like Iowa, Michigan and Wisconsin. He made things worse. And now, he is not capable of managing the crisis at hand. It is his Katrina moment. President Bush did not cause the hurricane, and neither did “Heckuva Job Brownie.” The Bush Administration did abandon New Orleans through sheer ignorance. Trump did not bring on the coronavirus. But he did downsize the Centers for Disease Control before the virus (the CDC was forced to cut its global disease efforts by 80% in 2018 because of tight budgets), and attempted to cut basic livestock research in half in his past two budgets (most pandemics emanate from swine or poultry). He has tried to dismantle the Affordable Care Act — if people don’t have insurance and can’t see the doctor how are they supposed to report their coronavirus?

But we did get a tax cut.

We are not supposed to talk about this in a political context. We are supposed to be unified. Yet the politics of this moment are explosive and completely unpredictable. The claims that Democrats have created a market panic when they don’t control the treasury or the health ministries are not registering with voters, as three confirmed cases were found in the Iowa City area — the first in Iowa — over the weekend. Trump is counting on the stupidity of the electorate, those who think Corona beer is off-limits. This will not get better until November, at least, virus or not.

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