After a nearly 18-month tariff stand-off, Phase I of the U.S.-China trade deal is set to roll out over the next two years. In this first phase, China has agreed to purchase $200 billion in U.S. agricultural and manufactured goods and energy exports, in exchange for a reduction in tariffs on goods purchased from China. The deal is expected to net $32 billion in Ag-specific exports.

U.S. farmers hope Phase I will usher in economic relief in what has become a weak international commodity market. And yet a real rebound in commodities pricing and an increase in domestic exports is still likely at least a year away. It will take a while for retaliatory tariffs to roll back and for U.S. agribusinesses and farmers to ramp up sales again with either previous trade partners abroad or to make new inroads in other markets. That’s a good thing because domestic farmers have already solidified their Federal Crop Insurance Program coverage for 2020.

2020 Trade Market Outlook

  1. Get a handle on your risk management profile. In order to reduce costs, make sure your farm or agribusiness is currently engaging in risk management best practices. This includes instituting good hiring practices and alcohol and drug policies, engaging in regular employee training and evaluating employee safety precautions.
  2. Have a clear understanding of input costs. Know your current input costs, including equipment purchases and maintenance, land upkeep and insurance, personnel and transportation costs. Evaluate them based on current and future needs.
  3. Assess your insurance portfolio. Work with your HUB broker to evaluate your insurance policies. Make sure they’re right sized for your current and potential future needs. Discuss new risks and or crops you’re considering with your broker and determine what those insurance needs might be when those additional goods or services are included.

While U.S. agribusinesses and farmers wait for trade to improve, they face 2020 with uncertainty and commodities pricing in flux. Tighter budgets are likely to endure, and rising insurance costs will persist at least throughout the year. U.S. farmers that can weather the current storm have a better chance of coming out stronger next year.

In the meantime, farmers and agribusinesses have a unique opportunity to “get their house in order” so that once the market corrects itself, they will be lean and prepared for growth.

Contact your HUB Agribusiness expert for more information on the current tariff war, and how you can position your business to come out stronger during anticipated Phase I market growth.