The CommStock report

Friday, June 22, 2018

Trump wants Americans to sit up at attention and idolize him like North Koreans do Kim Jong Un. He said that he was joking ... not really. Trump would like farmers to be in the first row of seats in his cheering section. I do not think that is a request if farmers expect any sugar from him. Secretary of Agriculture Sonny Purdue has assured President Donald Trump that farmers “love him.” Something like that would have used to be considered over the top but not anymore with this president. There is not too much that Trump can do to some farmers that they take real offense from. Some farmers seem to think that it is their patriotic duty to go broke if Trump asked them to. Trump has promised to protect farmers financially from his negative trade policies. Given the decline in corn/soybean prices as the result of tariffs, that promise will be tested.

I was entertained over how Trump took credit for not hurting farmers with his biofuel policy. Trump decided at the last minute not to assign RINs to exported gallons of ethanol in exchange for an E15 vapor waiver allowing summer sales ... the deal they were promoting. Politico quoted Trump, “I did a big favor for the farmers, and we love farmers, and they were happy.”

The smoke being blown at him by Sens. Chuck Grassley and Joni Ernst was working. The purchase of RINs substitutes for blending biofuel to meet RFS requirements. It was Trump’s idea to attach RINs to ethanol exports which would have inflated the supply of RINs and diluted the RFS. The way he tells it — because he didn’t drown the RFSs in RINs he did something wonderful for us and we love him for it. He threatens to damage the RFS, then doesn’t, and we are supposed to adore him for sparing us the loss. He was using it as a marker calling out Ernst telling her how he did her and farmers a big favor on ethanol. In other words, he didn’t hurt us, so therefore we owe him something.

He promised the E15 vapor waiver but summer may be over before we get it and he still wants something in return, some concession to refiners. In this instance his negotiating tactic appears to be to threaten us (with export RINs) and then expect lavish praise when he doesn’t follow through on the threat while still expecting us to concede something to get the E15 vapor waiver that he promised. That waiver is becoming worth less everyday as summer E15 sales are blocked because of lack of the waiver. Ethanol senators are forced to wash his feet and farmers to “love him for his benevolence.”

Grassley and Ernst are careful to focus criticism on EPA head Scott Pruitt while lavishing praise on Trump. They are playing along with the deception because that is what he responds best to. Pruitt works for Trump and Carl Icahn wouldn’t have gotten RIN waivers if Trump didn’t want that to happen. Grassley knows that. This must be like what “Game of Thrones” is like.

What I know for sure is that RIN waivers have been issued that shouldn’t have been, we were threatened with worse from diluting the RFS with export RINs and we haven’t gotten the E15 vapor waiver yet. If the ethanol industry would complain directly at Trump there would be retribution. I guess I am not a member of the cult, failing to see where he has done us any favors on the RFS, worthy of adulation. We are being asked as farmers to express our love for Trump so he will not further harm the RFS. What do you call that? He promised to make up losses to farm income from his trade war. What do you suppose he will demand in return? Every promise he makes has something he wants in return to keep it. Nothing is free. That is how he works.

The game is similar on DACA. He promised to protect DACA immigrants but to keep that promise he wants something in return. He is trying to leverage DACA for funding for his wall. He also is using the issue of separation of kids from family at the southern border as leverage to gain things that he wants.

The kid-separation tactic works for him in two ways. First, it is meant to discourage immigrants from coming to the U.S. and asking for refugee status. He wants to close our borders every which way that he can. His acceptance of DACA is contingent on DACA enrollees using slots that legal immigrants had to utilize, shrinking their number dramatically therefore being a means to shrink legal immigration.

The other way that kid-separation at the border helps him in negotiations is that it has riled up Americans who have empathy for such immoral treatment of kids. This is something we would have historically looked down on any country for doing. We were previously better than that. The outpouring of public and political opposition to kid-separation plays into Trump’s game. In order to stop it, you have to give him something. To stop ill-treatment of those kids he wants money for the wall. The ill-treatment of the kids is actually just like the tactic used on the ethanol industry of approving RIN waivers and then asking for a concession to stop.

This is a Trump strategy employed with some skill. If you want DACA then you agree to clamp down on legal immigration and approve money for his wall. If you want to stop abuse of the kids at the border then give him funding for his wall. He creates the leverage in what he sees as the negotiation, so where he can give concessions to not do bad things to you if you give him what he wants. If he removes or stops whatever bad thing he is doing, he expects to be glorified with adulation for not doing evil. No more RIN waivers, an E15 vapor waiver, compensation for farm income losses from tariffs, reapproving DACA, ending kid-separation at the border, and even approving a new NAFTA. All of these are in play to be traded for something Trump wants. They will all be very costly.

• David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an agriculture commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the internet.