US Agriculture

The US ag markets will probably get a big kick up when (if?) a US - China deal is struck. How much depends on the type of deal. If it looks like a realistic deal that both sides can enforce, it will be major, not just for the ags but for all risk markets. OTOH, if it looks like something where the Chinese are biding for time until a Democrat takes office, not so much. I think it will be bullish.

Longer-term tho, US agriculture will have problems. Here's my list...

- The US is no longer the low cost producer. US farming methods are now widely disbursed, and labor and land costs are lower in much of the world.
- The bull case for ags was always that developing countries will transition to a high-protein, high-fat diet like the US. I am beginning to think this will not happen. The US diet is basically a northern European diet. That was OK when people lives were pretty much farming and warfare. No one should eat that kind of diet now, but at least the northern Europeans have genetic association with it. It's especially bad for everyone else. The diabetes rate in China is higher than in the US. So I do not think that the animal-intensive diet will go worldwide.
- Climate change!!!!! I have explicitly avoided mentioning the CC phrase in this blog. I'm averse to conflict, LOL. But here it matters. The increase in CO2 is contributing to a "greening" of the planet which is increasing ag yields worldwide. Maybe good for humanity, but bad for the markets.
Here's NASA's take: https://www.nasa.gov/feature/goddard/2016/carbon-dioxide-fertilization-greening-earth
How to play this. This is not a commodity market story. The real play will be in farmland. There are several farmland REITs that I am looking to short, the most obvious being FPI. But we have to wait till the China story resolves.