The announcement late Sunday night that the United States had reached a tentative agreement with Canada to settle a trade dispute was welcome news to both farmers and to the grain markets.
“It creates certainty again,” explains Iowa State University Extension economist Chad Hart.
The agreement is part of an update to the North American Free Trade Agreement being called the U.S.-Mexico-Canada Agreement. President Donald Trump had threatened to throw out NAFTA during his presidential campaign.
After contentious negotiations, the Trump administration reached a tentative deal with Mexico at the end of August. That allowed the administration to begin the clock on getting approval for the agreement, which requires a 90-day notification, so the outgoing Mexican president could sign the deal before leaving office.
But those negotiators faced an Oct. 1 deadline and many members of Congress said they would not vote to approve any new agreement unless it also included Canada.
Most aspects of this week’s agreement with Canada did not impact farmers, Hart says. There is, however, language in the new agreement that could allow more sales of some dairy products into the Canadian market, which is good news for U.S. dairy producers.
But Hart says the biggest thing for most farmers is the simple fact there is an agreement. That adds certainty to the market and could help in dealing with the bigger challenge of finding common ground on trade with China.
“It shows that we’re bringing back some of our allies,” he says.
And he says that since grain prices in the United States are so low right now, it means that U.S. grain is a relative bargain for some international buyers.
“We’re a good deal right now,” he says.
For farmers looking to market grain, the move may not make a big difference, though it offered a price boost to start the week. But markets like stability, and this provides more predictability, Hart adds.