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Outlook 2019: Ag and political crisis

The year ahead will provide an opportunity for investors to help address the rural/urban divide that has contributed to political crisis in the US.

At the time of writing, a draft farm bill had passed both houses of Congress and was awaiting the signature of President Donald Trump. Reports suggested that true progress on the $867 billion legislation came only after lawmakers felt pressure from rural constituencies battered by this year’s agricultural trade disputes.

Its passage was hailed, quietly, as a rare instance of bipartisanship.

The 800-page bill ultimately addressed concerns surrounding crop insurance for irrigated and specialty crops, legalized industrial hemp and introduced modest changes to the Supplemental Nutritional Assistance Program, among other changes. Also included in the bill, was a provision limiting future Congressional debate on the use of the War Powers Act to continue US support for Saudi Arabia’s war in Yemen.

Though it is unlikely the Yemen provision will inspire backlash strong enough to doom the farm bill, its inclusion – and the heated criticism it quickly inspired – are a reminder that ours are not normal times in American democracy.

In May, farmland managers asked by Agri Investor explained that, though the farm bill can be vitally important to the overall industry, it is their tenants who are forced to navigate its confusing provisions directly, so there was little incentive for GPs to devote too much attention to tracking day-to-day sentiment around the effort. Managers and market observers nonetheless acknowledged that, while non-ag issues had always found their way into cultural debates surrounding the farm bill, compromise seemed harder to reach this time, tangential issues continued to slow progress and this year’s negotiations felt quite different.

The political crisis roiling the US stems in part from a divide between its rural and urban populations that shapes the agricultural investment environment in subtle ways. Though sometimes exaggerated, this divide certainly plays a role in US farmland markets, where those closest to the farm sometimes suggest having received an impression that financial investors can view the mounting financial pressures facing farmers only through a lens of opportunity.

As they attempt to establish genuine partnerships that can help ensure long-term prosperity for the best of these producers, the year ahead is likely to see agricultural investors challenged by the effects of attempts to inflame the rural/urban divide among Americans by a President fighting for his political life. Given that those genuine partnerships are the key component for the farmland asset class’s long-term development within the US, managers would be well-served to see the vacuum in national leadership as an opportunity to help set a more constructive tone.