Sylvain Charlebois — [Troy Media]
Donald Trump has been a topic of conversation at dinner tables for some time. Now, the American president-elect is poised to push up the cost of the food on those same tables.
Policy proposals on immigration, trade and security dominated the U.S. presidential campaign. Not much was said about agriculture or food policies.
But a new approach in Washington, with a Republican president and a Republican-dominated Congress, could affect what North Americans eat and how much it will cost.
Food prices have been dropping in recent weeks in Canada, so any increase in prices would be welcomed by the industry. Not so for budget-conscious consumers.
It all starts with energy.
Trump’s victory could have major implications on global energy geopolitics. Trump wants more fossil fuel drilling, fewer regulations and a complete withdrawal from the Paris Agreement on climate warming. His defiance of Organization of Petroleum Exporting Countries (OPEC) is consistent with his views on U.S. energy security. The Keystone XL pipeline project also fits well with his intentions.
All of this could initiate the next commodity super cycle. Trump’s infrastructure plan has already pushed up prices for iron, copper and other materials. Commodity prices could go h
igher and increase processing costs.
Agricultural commodity prices are still at historic lows and will remain so for a while. In parts of the U.S., food prices have dropped by eight to 10% in one year, the most significant drop in almost 50 years.
This is great news for consumers, but the number of jobs in the sector has stagnated over the last six months. The phenomenon has now reached Canada, to a lesser extent.
We all want lower food prices, but this situation clearly hurts the food industry. The sweet spot for food inflation is one to 2% a year. That allows industry to provide higher quality products at affordable prices.
With Trump in the White House, labour challenges will also rise. Eventually, Trump’s immigration proposals could impact your dinner plate. More than 66,000 temporary agricultural workers with visas enter the U.S. every year. Of greater note, an estimated two million illegal workers help U.S. farmers at harvest. Without that support, U.S. production levels will decline and prices will go up.
How will Trump create jobs for Americans in agriculture? It’s an issue Canada has also struggled with.
The next U.S. Farm Bill will be written by the Trump administration. The bill is American-driven but its influence is far-reaching. It’s easy to assume that American farmers will come first in any new legislation. We could see subsidies driving commodity prices higher.
For example, Trump has a thing for ethanol, which diverts grain to fuel production. That drives up grain prices as it restricts supply. Food prices jumped dramatically when oil was over $140 a barrel.
American farmers could be well served by a new Farm Bill, but the rest of the world should brace for more food price volatility.
Ironically, restaurants will benefit from Trump’s election. Restaurant chain stock values are on the rise after the election. And the push for $15 minimum wages was hit hard in many states during the election, which is also good news for restaurant operators. So menu prices could drop.
For Canadian restaurants, it means less pressure from the United States, for now. Many in the Canadian restaurant industry are cheering, ever so quietly.
Trump’s proposal of a 15% cap on business taxes will make some Canadian lawmakers nervous. We could see more food processing move from Canada to the States, where tax and labour costs are lower. This could further jeopardize our control over food supply chains and make it harder to maintain our competitiveness.
In addition, the loonie is likely to fall further with lower interest rates here, while the U.S. is likely to raise rates. That will make our food economy more vulnerable to currency fluctuations.
So as Trump policies push food prices higher over the next few years, Canada will not be immune. And higher food prices hurt consumers.
Dinner table discussion may soon centre around a global agriculture economy beset by abrupt shifts in commodity prices. And that’s unsavoury for consumers.
© 2016 Distributed by Troy Media