Donald Trump Was Elected by Farmers and They Are Worried

This article was first published by me on Talkmarkets:

Ginseng farmers in the red state of Wisconsin voted for Donald Trump. And they did so knowing their entire crop of cool ginseng is shipped to China! Tariffs are potentially in place for larger crops like Soybeans, as the trade war escalates, but ginseng is included.

That ginseng, a desired cool ginseng superior to the Canadian version, is being targeted shows me that China is very meticulous in potentially decimating the Trump base. Jim Schumacher, a ginseng farmer, made this incredible statement, and a similar one is being made by Wall Street:

"Maybe [people just didn't hear it], and maybe they didn't expect it to go this far. A lot of the things said on the campaign trail were more threats and things like that, I would think, and you just don't expect it to materialize, probably. So it's just ... you know, when it affects your industry, you definitely feel it a lot more."
 Wall Street has been saying it doesn't believe Trump, and is pressing ahead as if Trump will not carry through with tariff threats in a big way. Farmer Schumacher thought the same. Only time will tell if they are right but imagine the risk of voting for a guy who said he was going to trade war with China when your entire crop goes to China!

While I realize that Hillary Clinton was no prize herself, farmers should take free trade versus tariffs seriously because they are the first ones to feel the pinch, the first ones on the front lines.

Soybeans are a much larger crop than ginseng, and we know that crop insurance and derivatives hedging is big in soybeans and corn. Three states produce 80 percent of the soybean crop, Iowa, Illinois and Minnesota. Illinois and Minnesota are diversified economies. Iowa is a farming economy, and it is a red state as well. China targeted a little Wisconsin county and the state of Iowa.

Wilbur Ross says tariffs only affect 0.3 percent of business and stocks seemed to react to that assessment. What is not known is if Trump is simply negotiating around the edges or if he will respond with escalating tariffs as China imposes more tariffs. Also, the affect of financial instruments which are derived from underlying cash flows for commodities including agriculture, and resulting counterparty risk, will likely be measured by the behavior of the stock market.

I wrote awhile back that Donald Trump would have a difficult time reinvigorating rural America, all that land between the coasts that went for Trump in the election. Adding dangerous tariffs to farmers in those very rural areas has the potential of setting those economies back further.

The economic shocks that hit rural America and its cities are more powerful to rural GDP than many of the economic shocks that hit more diversified big cities are to their GDP. Soybeans are sensitive to threats to free trade.

Can farmers find alternative markets if necessary? Apparently farmers are dismayed by recent events targeting soybeans. Soybean industry president Heissdorfer said this regarding supporting Trump, before the soybean announcement:

“I’m still supportive,” he told me. “The tax program was as good as we could expect. He’s done several things that loosened regulations that will help us. But the tariffs? We need to see this through before we react.“But, at this point he has put industry ahead of agriculture, and agriculture is who put him in office.”

Farmers believe they put Donald Trump in office, yet Trump is favoring industry ahead of agriculture. This man's support is clearly on the wain. This is a warning to Donald Trump coming from the farmers who elected him. It should not be taken lightly. 


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