5 Reasons Why Agriculture is in Worse Shape Than You Think

With all the things that can go wrong with nature and markets, in order to be a long term “aggie” you have to have a fair amount of optimism and be a “glass half full” person, writes Dr. Jim Budzynski at CropLife. However, despite my optimism about the long-term future of American agriculture, that glass is feeling “half empty” recently. My near-term pessimism is driven by a number of trends that seem likely to persist for several more years.

1. Deglobalization

Deglobalization is underway and the “Chimerica” marriage of convenience is headed for divorce. American corporations wanted to outsource manufacturing to drive higher profits. China wanted to develop their industrial infrastructure and still feed a huge population while millions moved from the countryside to work in factories in the city, which was facilitated by buying massive quantities of U.S. raw ag commodities. The marriage worked fine for a long time in meeting these objectives, but with a few unexpected side effects. The U.S. severely damaged its middle class by moving the highest paying blue-collar jobs abroad (enter populism), and China damaged their air, soil, and water quality through rapid (inadequately managed) industrialization. Oops.

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So now American industry is rapidly moving supply chains out of China to find lower cost alternatives or using automation to cost-effectively produce products back in the U.S. (closer to the markets). China wants to clean up their environment while moving up the value chain (into formerly U.S.-dominated technology markets) with their new middle-class consumers. They also clearly wish to escape the stifling grip of the U.S. dollar. Our “Phase I trade deal” is the start of hammering out the divorce terms. Note: Deciding how to wind things down is not the same as getting back together. Even though we may not be able to afford to “move out” immediately, the romance is clearly gone. The “trade war” is by no means over – rather than the beginning of the end, it sure looks more like the end of the beginning.

Continue reading at CropLife.

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