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The Manitoba Co-operator | November 24, 2016
COMMENT/FEEDBACK
Trump’s food world
Many Trump policies could have wide-ranging impact on food and agriculture around the globe By Sylvain Charlebois Dalhousie University
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fter the shock comes the re a l i t y o f u n d e r s t a n d i n g what a Tr ump presidency and a Republican-dominated Congress will mean to all of us. Over the last two years, policies on immigration, trade and security have dominated the campaign. Not much was said about agriculture or food policies. By the looks of it though, a new approach in Washington could affect what we eat and most important, the cost of food in general. In fact, the “Trump effect” could increase the cost of our food over the next few years. With food prices dropping in recent weeks in Canada, this could be welcome news for the industry, but not so much for budget-conscious consumers. First off, Donald Trump’s victor y could have major implications on energy geopolitics around the world. President-elect Trump has called for more drilling of fossil fuels, fewer regulations and a complete withdrawal from the Pa r i s A g re e m e n t . Hi s d e f i a n c e towards OPEC is consistent with his views on U.S. energy security. The Keystone XL project also fits well with Trump’s intentions. All these measures could potentially initiate the next commodity super-cycle, as we witnessed with the Bush administration a decade ago or so. Trump’s infrastructure plan has already pushed up prices for iron, copper and other materials. Commodity prices could go
A new approach in Washington could affect what we eat and most important, the cost of food in general.
higher and increase input costs in processing. For now, agricultural commodity prices are still historically low and will remain so for a while. In some parts of the United States, food prices have dropped by as much as eight to 10 per cent in one year, the most significant drop in almost 50 years. This is great news for consumers, but the number of jobs in this sector has now stagnated over the last six months. This phenomenon has recently reached Canada, but to a lesser extent. Even though we all want lower food prices, the current situation is clearly hurting the food industry. The proverbial sweet spot for food inflation is anywhere between one and two per cent a year. Such a threshold is manageable for all and allows the industry to provide higher-quality products at an affordable price. With Trump in the White House, labour is another challenge which could generate headwinds. Eve n t u a l l y, t h e w h o l e i s s u e o f immigration could also indirectly affect consumers’ dinner plates. Tr ump’s proposed immigration laws could harm American agriculture. More than 66,000 temporary agricultural workers with visas enter the United States every fiscal year — not a significant amount.
However, U.S. agriculture has an estimated two million illegal workers helping farmers at harvest time. Without such support, U.S. production levels will be negatively affected and could push prices higher. It will be interesting to see how president-elect Trump intends to create jobs for Americans in agriculture, an issue Canada has also struggled with. The next Farm Bill will of course be written by the Trump-Pence administration. The Farm Bill is American driven but its influence is often far reaching. It is unclear how policies will take shape under a new Farm Bill, but it is easy to assume that American farmers will come first. We could see subsidies driving commodity prices higher for a while. Just like Bush before him, Trump has a thing for ethanol. We all remember what happened with food prices when oil was over $140 a barrel. American farmers could be well served by the next Farm Bill, but the rest of the world should brace themselves for more food price volatility. Abrupt fluctuations of commodity prices at farm gate value will always penalize emerging markets. Ironically though, Trump’s known abhorrence for regulations will benefit the bottom line for many restau-
rants. Since his election, stock values of many restaurant chains have gone higher. The $15-an-hour fight was hit hard by Trump’s victory which again signifies good news for restaurant operators. Unlike general food prices, menu prices could drop. For Canadian restaurants, it means less pressure coming from the United States, at least for a while. Many in the Canadian restaurant industry are likely cheering, but ever so quietly. Trump’s proposal of a hard cap on business taxes at 15 per cent will make some Canadian lawmakers nervous. We could see more food-processing closures in Canada or could see many operations relocating to the States, where labour costs are more competitive. This could jeopardize further our control over food supply chains. It may become harder to maintain our level of competitiveness, faced with such a fiscal shift south of our border. The loonie is likely to fall even further with lower interest rates here, and the Federal Reserve is likely to raise rates in the U.S., both causing our food economy to become more vulnerable to currency fluctuations. In sum, a Tr ump administration could push food prices higher over the next few years, and in this case, Canada would not be immune to this shift. Menu prices in restaurants could be spared though. Higher food prices in general may be problematic for some consumers. What will be more challenging for all are abrupt shifts in commodity prices. That will be bad for everyone if Trump-esque ideologies spell trouble for global agriculture.
Dwayne Andreas founded the ‘Supermarket to the World’ Former ADM chairman used his connections to build the world’s largest grain and oilseed processor BY JOHN MORRISS Editor emeritus
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ast week’s passing of former Archer Daniels Midland CEO Dwayne Andreas at age 98 serves to remind of his remarkable success and his influence on the world grain trade, including here in Canada. In 1993, Andreas was in W i n n i p e g t o re c e i v e a n International Distinguished Entrepreneur Award from the University of Manitoba. A few journalists got a surprise call advising he was at the hotel and that we’d be welcome to talk to him. I walked over and was waiting in the room when the door opened, and in walked not Andreas, but a man who pumped my hand and said “Hi, I’m Ross Johnson.” This was a bit of a shock, g i v e n t h a t Jo h n s o n h a d recently been the subject of a book and made-for-TV movie called “Barbarians at the Gate” and was at the time the poster boy for corporate greed of the late 1980s. As president and CEO of RJR
Nabisco, he had launched a breakup and management b u yo u t w h i c h u l t i m a t e l y failed, but left him with a huge personal profit. A chat with Johnson shed some light on why he was t h e re, a n d p e r h a p s w h y Andreas was receiving the award — he had no particular connection to the province. But Johnson does. He is originally from Winnipeg and is a University of Manitoba graduate. The optics of him receiving an entrepreneurship award might have been a bit shaky, but Johnson was an ADM director and perhaps had some influence on the decision to give the award to Andreas. Johnson also mentioned that the next stop on their Canadian tour was a farewell dinner for his friend Brian Mulroney, who we later learned would join him on the ADM board. This might sound like background for a press conference featuring classic American free enterprise rhetoric, but it certainly wasn’t. Andreas entered and immediately engaged in a long and wideranging discussion of world
a g r i c u l t u re i n w h i c h h e emphasized the importance of fair incomes for farmers. He said a free market in agriculture is a “pie-in-the-sky” theory. As for leaving farmers to the “vicissitudes” of the marketplace, “The problem with that is when farmers compete with one another, they can devour the land during one generation, use up the topsoil in order to get cash enough to cover next year’s seed, but with what a free market produces for them they cannot possibly keep the topsoil, because that costs money, lots of money.” In a line he’d use many times in his career, Andreas said that “Waiting for a free market in agriculture was like leaving the porch light on for Jimmy Hoffa,” a reference to the Teamsters Union boss who disappeared in 1975 and who was never found other than in stories in supermarket tabloids. It must be said that Andreas’s world view was not entirely altruistic. As the world’s largest grain and oilseed processor, ADM has a vested interest in a large
and steady flow of products to process, and the farm programs that Andreas supported helped ensure that. And as with Ross Johnson, ADM was soon back on the Hollywood screen for the wrong reasons, with Matt Damon playing an ADM executive who informed the FBI about the company’s role in an international price-fixing scheme for lysine and citric acid from its corn-processing plants. The investigation led to a $100-million anti-trust fine, the largest in U.S. history, and the jailing of three ADM executives, including Andreas’s son Michael. The company’s besmirched reputation didn’t discourage United Grain Growers from turning to it as a “white knight,” selling 45 per cent of the co-op to protect it after a buyout attempt by Alberta and Manitoba Pools in 1997. That was just one example of how ADM was prepared to work in the background as a part owner of co-ops. After a series of deals with European co-ops, it recently completely took over Toepfer, making ADM one of the largest four
international grain trading houses in addition to being the world’s largest processor. Bringing Mulroney on to the board was another example of Andreas’s skill at making connections. He was a major donor with strong connections in both U.S. political parties, and was a personal friend of former Soviet leader Mikhail Gorbachev. In a 1990 interview he said, “How the hell could you run a business like mine if you didn’t have communications with the people who make the big decisions?” ADM also has an astute domestic PR strategy, sponsoring high-profile news programs including on the Public Broadcasting system, using its tagline “Supermarket to the world.” Which is an apt description for a company that for better or worse, has such a powerful influence on the world’s food supply. Quite an achievement for a former flaxseed crusher that Andreas took over in 1965. John Morriss is a former publisher and editor of the Manitoba Co-operator