32 / SEEDWORLD.COM JANUARY 2018 Basse notes. Occasionally, erratic weather causes damage, but the number of droughts has dropped. Even if there is a drought, another country will be able to make up the loss of crops. Hemispheric production, which is when one country can provide a crop for another country's dry season or winter, will ensure that there is enough grain to meet current needs. Programs in Place Basse says that along with new demand, the U.S. needs structural change, and the best way to do that is to set aside acre- age through government programs, such as the ones implemented by the U.S. and European Union. One program, the U.S. Conservation Reserve Program (CRP), is capped at setting aside 24 million acres, and the program can’t take any more applicants. Basse says another 20-25 mil- lion acres need to be set aside to help alle- viate the oversupply of grain. Historically, CRP’s goal was to set aside 39 million acres when it started in 1986. The European Union also has implemented policy changes and acreage set aside as part of its Common Agricultural Policy.  “To think about having set aside programs is rather unlikely and difficult,” Basse says. “U.S. export shares globally are in decline. It would only enhance the profitability of a Brazilian or Argentinian or Russian farmer.  “We're just left with a world of over- supply” Trade and Policy Current U.S. politics also affect the over- supply issue. Basse said there are several questions that will need answered: “Will Trump administration do anything about NAFTA? Will we alienate trade partners?” If we do alienate trade partners, Basse says the oversupply problem will worsen.  “We're hoping trade stays bilateral and open, but we're concerned about the poli- tics of trade with the new administration.”  A new U.S. Farm Bill may also be in question. The bill was scheduled to be writ- ten this year and enacted in 2018. However, Basse says it may be delayed until 2020 and the next major U.S. election cycle. “The U.S. farm population is down to its lowest level since the Louisiana Purchase in the 1800s,” Basse said. “Ag votes don't resonate as much in Washington.” On the other hand, Basse is predict- ing a weaker dollar for 2018, a result of the discussions around a new tax bill. The tax bill has been positive for the dollar short term, Basse says, as its implementa- tion would stimulate the U.S. economy with GDP rates increasing to 3.5 to 4 percent. However, the U.S. budget deficit would dramatically increase, which would weaken the dollar longer term, Basse says. A weaker dollar would cut into profit- ability of major competitors like Brazil, Argentina and Russia. Other than adverse weather, this is the best hope to curtail foreign ag production. Still, adapting to new demands will take time. Basse said it took 10 years to reach a point of biofuels maturation, and it will take time again. Over time, the costs of machinery, land, nitrogen and seed would need to decrease for the U.S. agri- culture industry to move forward. “U.S. farmers have made it on $3 corn before, but his cost profile was lower than they are today,” Basse says. “Costs have to go down so the U.S. farmer can com- pete in the world marketplace again.” Basse compared the compression of costs to pounding a fence post in dry dirt.  “You have to keep hitting on it in order for a change to happen. “It’s a process, not an event.”  SW “We’re hoping trade stays bilateral and open, but we’re concerned about the politics of trade with the new administration.”  — Dan Basse Dan Basse is president of AgResource Company, an economic forecasting firm specializing in agriculture.