ANALYSIS: Does Iowa hold the key in Trump’s re-election push?

The confirmation of Joe Biden as the US Democrat presidential candidate Thursday means that eyes are now firmly focused on the forthcoming US election and what it could mean for key trade relations, biofuel policy and the country’s corn and soybean balances.

At the centre of the coming storm could be one of the country’s - and the world’s - biggest corn and soybean producers: the state of Iowa.

With production of nearly 70 million mt expected in 2020/21, Iowa alone would stand as the fourth-biggest corn producer globally; the state is also home to a significant portion of the country’s ethanol capacity.

Alongside that, the USDA expects Iowa’s soybean production to reach almost 15 million mt in 2020/21, putting the state at the crux of many of the key policy decisions implemented by the administration of incumbent president Donald Trump over the past four years - and its electorate may make a decisive contribution to the November 3 election.

With reports suggesting that support for Biden is now close to that of his Republican rival, many are asking if farmers - traditionally a conservative bastion - will stay a loyal part of the Republican base or if they are mulling a change to back a party that is not typically strong in the country’s agricultural heartland.

According to recent polls, support within the state for Trump is now only 1-3 percentage points ahead of that of Biden, while Republican junior state senator Joni Ernst, also up for re-election this year, is facing a strong challenge from the Democrats, who are looking to lock up both the presidency and control of the House.

The outcome of the state’s voting in November’s election is now too close to call.

Would an incoming Democrat administration be willing to continue what has been a generous government-backed aid programme, which Washington rolled out in 2018 to farmers to compensate for lower prices and lost sales from the trade war between the US and China - and would trade ties between those two countries be normalised?

While many farmers are loath to admit the benefits of state handouts, aid under the Trump administration has rocketed to hitherto unseen levels.

First aid

Studies conducted last year assessing the first round of aid in 2018 concluded that farmers had fared better under the payments than if they had tried to sell their product on the open market.

And given additional Covid-19 aid payments in 2020, direct aid to farmers this year has risen to more than $32 billion, according to some estimates, almost $10 billion above last year’s tally and far higher than the $13 billion handed out in 2018 at the height of the trade war.

“I think farmers will still vote for Trump. I think Trump will give another payment to make sure he gets the farmer vote... [And] most Iowa farmers are looking for money due to the major storm damage [from the derecho winds earlier this month],” Chuck Shelby, farmer and president of Risk Management Commodities, told Agricensus.

“Trump can get them money now - Biden can’t,” Shelby said.

Trade deal

While the phase-one deal inked in January has boosted agricultural purchases by China, including for soybeans - cumulative sales in volume terms for 2019/20 alone were up 19% year-on-year as of last week - the value still falls far short of this year’s target of $12.5 billion on top of the 2017 baseline figure.

In the first six months of the year, total agricultural exports to China came in at $6.44 billion, well behind the 2017 baseline figure of $8.15 billion.

As well, despite Chicago soybean futures for September and November trading solidly above $9/bu, farmer selling has reportedly been slower than expected while most await even higher prices.

Many also feel that China has now become such a contentious topic following the coronavirus outbreak that it would not be in Biden’s interest to rush into a détente with the world’s largest soybean consumer just yet.

Energy

On the domestic front, biofuels have arguably faced a bigger challenge under the Trump presidency because of fewer perceived government benefits, narrowing production margins and a huge expansion in the number of biofuel blending waivers issued to refiners.

Given Trump’s record of apparently favouring the conventional oil sector, Biden may fare better thanks to a climate plan that specifically targets “the development of advanced biofuels”.

“Joe Biden believes renewable fuels are vital to the future of rural America - and the climate. The Biden Plan will invest $400 billion in clean energy research, innovation, and deployment - more than twice what America spent to put a man on the moon,” Biden’s campaign website states.

Just last week, the country’s Renewable Fuels Association told reporters in a call that waivers granted by the Trump administration over the past three-and-a-half years have reduced the amount of ethanol being blended to 13.8 billion gallons per year from a statutory 15 billion gallons.

That translates directly into less corn used in the grind. USDA estimates show corn used to produce ethanol contracted 4% between 2017/18 and 2018/19 because the waivers slashed demand - before Covid prompted a more catastrophic slowdown.

“Covid-19 is the biggest thing to do with ethanol, and our ethanol production is down 10-15% on last year... this has nothing to do with politics or waivers,” Joe Vaclavik of Standard Grain told Agricensus.

And reports this week suggest that Trump may hold off on making any quick decisions regarding the biofuels debate, instead choosing to wait until after the election for fear of upsetting either the powerful farmer lobby or the energy lobby.

Yet despite the generous aid payments given to farmers over the past several years, other sectors and employment in the wider agricultural sector have been affected, potentially limiting the share of the vote Trump gets from the Midwest.

“Farmers have one marketing plan, and that is trade,” Christopher Gibbs, an Ohio-based farmer and a member of the Rural America 2020 forum, told Agricensus.

“[Trump’s] punitive tariffs have strained relationships with our trading partners to the breaking point. These relationships were built by farmers, not governments… I will not be voting for Donald Trump again,” Gibbs said.