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Page added on January 11, 2019

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How a Global Collapse Will Affect American Farmers

Business

Are we heading for a global financial collapse? What can we expect from the trade wars? Should we build a wall? Geopolitical strategist Peter Zeihan will be sharing his answers to those questions, and many more, at the Land Investment Expo on Friday, January 25, 2019, at the Iowa Events Center in Des Moines, Iowa. Tickets are still available.

Successful Farming caught up with Zeihan ahead of the Land Expo to get a preview. His responses are eye-opening.

SF: What is the top global issue?

PZ: The trade war. People are underestimating the impact the trade war is going to have on the global system. This is the year that historians will look back on when everything broke. This is the beginning of the end of the last 70 years of international stability.

We are currently on a break from the trade war. The tariffs are locked and loaded and ready to go. With a tweet from the administration we will have 25% tariffs on about half of what the Chinese export to the U.S. The Chinese do not have the capacity to respond in kind, because there is not enough of a trade portfolio there for them to tariff.

SF: What is the end goal of the trade war?

PZ: That is the big question I have for the Trump administration. Is it for the Chinese to be subordinate to American interests for the next half century? Or is it to destroy them as a country? From the way the Trump administration seems to work, it looks like the second option.

SF: How will American farmers come out?

PZ: It will shake out for America very well and American farmers far better than most sectors, but there will be ups and down. The process of the old system breaking down will cause instability. It won’t be fun.

SF: What is the worst-case scenario for the U.S.?

PZ: In the long term, the worst thing we can do is try to preserve the global order. You can do that when you are one third of global GDP, but today the U.S. is only 20% of global GDP.

The whole premise of the old structure was that we would stabilize the system and support your economy if you sided with us against the Soviets. The Soviets are gone, so the strategic rationale for that system is gone. We can’t support that kind of system anyway. So this was all going to break down. The only way this ends badly for the United States is if we try to preserve the old system.

SF: What is the worst-case scenario for the Chinese?

PZ: That they are not a functional country. The strategic environment that the United States created to fight the Cold War is what allowed China to unify and develop. Without that environment the whole thing falls apart. [President] Xi Jinping and his administration are terrified that the whole system is going to collapse and they are absolutely right. It is going to, and it won’t go down quietly.

SF: Let’s switch to Mexico. How important is Mexico?

PZ: If there is one country on this earth that the United States should actively seek to maintain and expand good relationships with, it is Mexico. The reasons are economic, security, trade, drugs, and population. About one sixth of the American population has roots in Mexico. It would be ridiculous for us to ignore that.

SF: Should we build a wall?

PZ: If your goal is to keep legal labor bottled up in Mexico and to keep Mexican labor cheaper, then the wall is a good idea. A wall would encourage a poorer Mexico. If you have a big wage differential, you get more migration. The wall forces all of it to be illegal migration. They will just go through tunnels. It is a 2,000-mile-long border. There is no way to patrol it effectively. Securing a border when you have a 5-to-1 income split is just not possible; all you do is criminalize it.

So, if your goal is a poorer Mexico, an increased drug trade, and more illegal migration, the wall is a great idea.

SF: U.S. farmers have a shortage of labor. Is Mexico the answer?

PZ: We are past the point of no return. Two years ago was the peak of Mexican labor availability in the United States. It’s only going to shrink from now on. And the peak for Central American labor in the U.S. is two years from now, and then it will shrink.

The only alternative at this point, if your goal is to bring in seasonable labor, is to work with the Department of Homeland Security and the State Department to bring in refugees. That is the only market available. I don’t see that as being viable in today’s political climate.

SF: What is the answer?

PZ: You have to figure out how to get by without labor. There are a few models to follow. The Dutch are probably the best in the world at applying technology to agriculture. They already have fully automated tractors. Some countries have already broken ground for you on that topic. You don’t have to reinvent the wheel from scratch.

SF: What’s happening in Brazil?

PZ: Brazil is a very capital-intensive system. It’s impossible for a family farm to get going in Brazil. The capital costs for infrastructure, land development, and inputs are just too high. Brazil is the most economically unequal society in the world. The richest people there are all in agriculture, so farms in Brazil tend to be 10 to 15 times the size of what they are in the United States. The political mood is Brazil is pretty sour in part because of that inequality issue. Crime is incredibly high. The population is getting pissed off and starting to get rebellious.

Brazil just elected a law-and-order president, Jair Bolsonaro, who is perceived to be uncompromising on crime. He is also a big supporter of big agriculture. In the short term, this means more slash and burn, land development, and plowing down the rainforest.

As the global order breaks down, Brazil’s agricultural challenges will increase. In the next year or two, depending on how fast things globally go to pot, Brazil looks really good. After that, you are looking at a catastrophic collapse in Brazilian output because the inputs such as fertilizer are going to be harder to get. Brazil agriculture doesn’t work without massive inputs.

Brazil today is as good as its going to be. It has the perfect environment. Outward finance is strong, the ability to tap the international system for fertilizers and fuel is strong, and the government is very pro-ag. All of that turns inside out in the next three years.

SF: Where do you see world meat demand going?

PZ: I see global demand for animal protein dropping, but the markets that the U.S. has the most exposure to will be great – Southeast Asia, Mexico, and Central America. These are the places American farmers should look at.

Mexico, especially when it comes to beef, is far and away No. 1 for us. In Mexico, beef is considered a staple like it is here. When they get a little bit of money and can afford something better, they switch from Mexican beef to higher quality American beef. Any economic growth in Mexico immediately translates to support for the beef supply chain in the United States. I’ve always been a fan of Mexico as a destination for value-added agricultural exports.

In China, pork is a luxury good. If you get a period of economic duress you cut that out of your diet.

SF: Could livestock diseases affect the global meat supply?

PZ: When it comes to keeping diseases out of herds, no country in the world is as good as the United States. If a swine disease is going to hit everyone, our pork herd is going to be declared safest first.

SF: Is the U.S. headed for an economic recession?

PZ: A hard trade break could cause a recession at any time, but leaving that aside, I don’t see any reason why the United States would be in recession in the next 14 months. The fundamentals look pretty good.

There is likely to be a political crisis in Europe, Britain, Canada, China, and Turkey. So a global recession in which the U.S. does not participate might start this year. That would have implications for agriculture.

Most of the U.S. economy is domestic, so it would take a really bad trade crisis to hurt us. We are in the process of ratifying and implementing trade deals with Korea, Mexico, and Canada, and we will probably add Japan and Britain to that this year. That is half of our trade portfolio. If those are implemented by early 2020, you are looking at the U.S. being pretty resistant to a global breakdown.

If you had asked me two years ago what happens when the global system breaks down, I would say the United States is going to have a recession for a couple of years. We are now looking at that transition period being shorter and less painful. The deals we put together replaced what we had in the old order.

SF: What’​s happening with global population demographics?

PZ: Even in the developing world, the birthrate drop-off is faster than expected. Fewer people age 15 to 40 are having kids. The money that used to go toward diapers, feeding kids, and housing kids is being put toward better cars, better living conditions, and better food. We are seeing a value-added expansion in middle classes around the developing world.

That’s great for growth now, but not in the long term. Once they age toward retirement, spending falls off a cliff and there is no replacement generation. That is what Europe and Korea are going through right now.

The Boomers generate all the capital that drives global finance. The majority of them flip into mass retirement in 2022. We are still in this capital-rich environment, but it’s going to flip on its head in just three years.

SF: Anything else farmers should watch?

PZ: We are looking at simultaneous financial crises in the Euro zone, in Britain, Canada, Turkey, Brazil, and India. The amount of money that’s going to be flowing into American finance just to find a safe haven is mind-boggling. We are talking multiple trillions of dollars. A lot of it will go into T-bills, which will keep overall borrowing costs reasonable. If they can, they are going to try to get at farmland.

agriculture



6 Comments on "How a Global Collapse Will Affect American Farmers"

  1. I AM THE MOB on Fri, 11th Jan 2019 6:48 am 

    You are all wrong we only have minutes left before TOTAL COLLAPSE!.
    My bunker is ready, I have several sex slave midgets and 2 weeks worth of beer stocked( 220 cans of bud). All you fuckers on the surface will be turned into sex slaves within the first 3 days by all the roaming gangs of zombies.
    Prepare to burn in the hell fire! Holy Jeebus!

  2. Here we go again on Fri, 11th Jan 2019 7:30 am 

    Ready with my pee shooter to take down pigeons, squirrels and iguanas!stocked up on can goods and Mac and cheese. Life is good!
    After the bottleneck got my book
    “,How to Serve Man”, from the Outer Limits Store.

  3. Davy on Fri, 11th Jan 2019 7:58 am 

    Well obviously this individual is wrapped up in politics and the corporate mentality. You know status quo stuff. He does not understand collapse and agriculture in a holistic sense. This about a collapse process which is systematic with networks residing in locations adapting over time. Industrial agriculture is vital now but is not sustainable long term. It can sustain itself over time in a decline process that is less severe if properly adapted. It may end tomorrow but the nature of its adaptation to decline is rather expansive so how quickly it fails depends on actions now. It appears we are at the boundary of ecosystem overshoot so now is the time for change.

    Modern agriculture is determined by the system that resulted from fossil fuels and industry. This so called green revolution has little green about it. It is about the commoditization of land, plants, animals, and humans in an industrial system driven by private profit controlled by public agreement. This can be extended beyond our food system to everything we do. We are late stage capitalism and the late term civilization of competitive and cooperative liberal democracy. We tolerate each other because this is to our benefit we compete because this is human nature. Agriculture has followed our economic activity of global financialized economies of scale of goods transported just in time over global networks. Agriculture has followed this with industrialization of the equipment, imputes, and markets of large farms with vast monocultures. Within this system also dwells subsistence farming and small hobby or part time farms that function alongside and in conjunction to global industrial agriculture. These farmers are still dependent on the greater industrial system for their needs but their agricultural efforts may be or partially be considered industrial. In any case the global system allows them this effort. Many hobby farmers are also industrial workers in some form. Subsistence farmers are supported or tolerated by the industrial system.

    So as you see a collapse will reduce the system to a very small subset of what it is currently because industrial agriculture is not resilient to collapse. It is resilient and sustainable as long as industrial society is. Industrial society is not sustainable longer term so industrial agriculture will end as we know it eventually. It is the degree and the duration of the shock that will dictate how this process unfolds. If it is mild enough then we might see adaptation and mitigation to help what will surely be pain and suffering that hunger and famine bring. If we can limit destructive change to isolated hunger and famine and just lower affluence elsewhere then this could be very different from a hard and quick collapse.

    We don’t know how this will proceed but we should know it is very important that we change the way we grow food and live in agricultural communities now that we realize how dangerous our situation is. If we were wise we would be subsidizing the return of subsistence farm communities supported by the status quo and avoid destroying current ones. The status quo would do this out of enlightened sense of longer term survival. We don’t think this way and few are enlightened to the true state of affairs so changes will likely be ad hoc and insignificant to the changes ahead. It is possible that preludes of crisis will allow quicker enlightened change as time goes on. We have the science on what needs to be done. We just don’t have the social narrative and the will as a people. We need education and technology but most of all the wisdom to use the proper combination of knowledge and technology. We are too busy competing as individuals and nations to be more affluent than planning mitigation of this collapse process. Industrial agriculture can crash very quickly with little to take up the slack. If we were smart we would put some more sustainable agriculture in place to cushion the blow. No agriculture can feed so many people as our current industrial agriculture so forget something new and better. Instead wonder how many will be lost when what we have decays. We are truly facing dangerous times but with a delusional social narrative of techno optimism and cornucopian fantasy. We are aware of dangers but we are corrupted by delusional solutions. It is also about the incompatible shared idea that everyone else needs to change but we the individuals wants more. Most would sacrifice but they understand others will not so why do it in a self-reinforcing chain for failure. This is a dilemma of large populations that must cooperate and it is something that is likely not going to be adapted. We are stuck in this predicament.

    If you care and feel awakened then you will practice relative sacrifice by doing what you can but realizing you are stuck in the status quo. You can yield to the greater forces but adapt them as you can in your small place in the bigger picture. Help out the planet in your own small little way. Try to educate others where you can if you are enlightened. Embrace the planet and turn your back on the delusional social narrative of modern life. If you do then naturally you will try to do permaculture or forage in the natural environment with careful consideration of your footprint. This comes naturally from the awakening you will experience.

  4. eugene on Fri, 11th Jan 2019 9:12 am 

    I find the “be happy, don’t worry” crowd almost irrelevant. They always have a great future in mind with America cheerfully dominating the rest of the planet. I guess it’s the only choice they have when they find the future too painful to bear.

  5. Sissyfuss on Fri, 11th Jan 2019 9:35 am 

    The corporate mind f#&k grows in intensity and desperatio to keep BAU functioning well past its due date. And we adhere to its fantasies like the addicts that we have become. The inertia of our industrial civilization cannot be altered. We will ride it to the very end.

  6. asg70 on Fri, 11th Jan 2019 10:11 am 

    “SF: What is the top global issue?
    PZ: The trade war.”

    Unrelated to peak oil.

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