US dairy market: with or without Trump

In general, we can say that farmers support the current US President Donald Trump in connection with the unprecedented financial support for the industry. However, no matter who wins the US presidential election, the new administration will continue its protectionist policy towards third countries that generally benefits the American dairy industry, perhaps softening the rhetoric a little if the Democratic Party wins.

Farmers are for Trump

November 3, 2020 is the official voting day in the United States, the final of the presidential election. According to the BBC, almost half of voters have already voted early, and all opinion polls without exception show that the Democratic candidate Joe Biden is confidently ahead of his rival, the current US President Donald Trump. However, the outcome of the battle is not decided yet.

According to the Farm Journal survey, which covered about 5 thousand American farmers, 85% of respondents plan to vote for Donald Trump.

This may be due to the support that the administration of Donald Trump provided to farmers in 2020 to fight the consequences of the pandemic, and the promises of new financial injections. The U.S. Department of agriculture (USDA) estimates that direct Federal payments to farmers will reach $37.2 billion in 2020. The bulk of the funds will be provided under special emergency assistance programs, including a support scheme during the coronavirus pandemic. This is likely to be the largest amount of government payments in history. At the beginning of September 2020, US farmers were approved for payments of $9.4 billion under the $16 billion Coronavirus Food Assistance Program, which was launched in April 2020.

In September 2020, during a meeting with voters in Wisconsin, Donald Trump announced another $13 billion in aid to the agricultural sector.

At the same time, it should be understood that the agribusiness segment suffered losses due to the trade wars with China unleashed by Donald Trump. In fairness, it should be emphasized that increasing US agricultural exports to China has always been one of the key requirements of the Trump administration in negotiations with the Chinese side. Trump's policy toward China was a catalyst for the deterioration of relations, but the confrontation between the two giants, the United States and China, began long before Trump came to the White house.

We will remind that in a study by Deutsche Bank, the economic confrontation between the US and China will be one of the key factors in the current "era of disorder" and the conflict will continue regardless of the outcome of the US election.

At the same time, during the Trump presidency, trade conflicts escalated not only with China, in the case of Mexico and Canada, this led to the signing of a new agreement, in the case of the EU - to growing tensions. If inside the country, Donald Trump is a follower of the free market, then in relation to third countries, the policy of protectionism is obvious. In addition, as mentioned above, the protectionist course is unlikely to be changed even if the Democrats win, at least in relation to China. Perhaps the rhetoric will be softer, but the policy will remain the same.

US dairy market in 2020 

The US dairy market experienced a perfect storm in 2020, the catalyst for which was a pandemic, but the reason, according to the Center for economic and policy research at the Institute for new economic thinking (INET), was the policy of market consolidation, which led to the washing out of small players from the market and the creation of giants like Dean Foods, which eventually went bankrupt.

According to IFCN, between February and May 2020, the largest price drops in the global dairy market were recorded in India and the United States. Although demand for milk in retail has increased in the context of the pandemic and quarantine, this has not covered the decline in the catering sector. In the US, the price of milk fell by 29%.

However, even in the face of a pandemic, the US Dairy Export Council (USDEC) has worked to increase the supply of dairy products. According to the Clal Agency, in January-August 2020, compared to the corresponding period, exports of butter (-14.3%), cream (-5.8%) and condensed milk (-34%) from the United States decreased, while exports of drinking milk (+1.7%), cheese (+2.3%), skimmed milk powder (+29.5%), whole milk powder (+2.7%) and whey powder (+18.3%) increased.

Most likely, even with the coming to power of the Democrats, the promotion of the interests of American companies in the markets of third countries will continue, maybe it will become a little less aggressive. Economic confrontation with China also remains on the agenda in any case, as well as trade disputes with the EU. The recovery of the economy after the coronacrisis, the end of which is not yet in sight, is likely to depend little on the change of the head of state and administration. In addition, the worst-case scenario, experts say, would be mass riots and possible political uncertainty after the election, if one of the parties refuses to recognize the results.

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