It’s Valentine’s Day today as I sit down and pen this. A day created by Hallmark for guys who said they loved you 22 years ago and would keep you posted if there was a change to that.
My mother had it drilled into my head that I needed to buy flowers regularly for my wife. She stressed that when I had daughters, I was actually buying flowers for their mom so they knew how they should be treated. This Valentine’s Day was the first day that I bought a rose for each of my daughters so they knew how a guy should treat them. I did, however, buy them from the gas station, and they were plastic, so at least these future gentlemen have a fighting chance.
The theme for much of this issue is predictions for 2025. We love predictions, whether it’s sports talk radio predicting who will win the Super Bowl, or the stars somehow predicting which guy is most likely to buy you plastic roses for the rest of your life. My prediction is that things will change, prices will go up and prices will go down. Fairly bold assessment. It’s always amazing to me how predictions for future milk or grain prices typically print out the next 12 months of CME prices and confirm this is where things will go. Yet, we know that this market is still an inefficient market, and mistakes and predictions are constantly wrong. Now you, dear reader, are saying, “OK smarty pants, what’s your prediction?”
We are truly in unprecedented times politically and globally. On the trade front, we are literally one post away from President Donald Trump on X from milk or corn going limit up or limit down. In the weekend trade war with Canada and Mexico, we had milk open up on Monday morning down some 40-50 cents. Then once news broke of a temporary stay in the trade spat, milk whipsawed back up to finish the day positive by some 30-odd cents. While we on this side of the border like to point to Canada’s 270% import tariff on American dairy imports, there is still $1 billion of U.S. dairy that does make its way into Canada. That coming home is a giant shock to the system. On the southern border, we have roughly $2.5 billion of dairy exports making their way into Mexico. If we decide to have a trade war, and the world’s worst Cinco De Mayo without avocados and tequila, it’s possible we have to find a new home for $2.5 billion of dairy goods. We also have several issues that look to potentially support milk prices – high beef prices, a lower heifer population, high milk prices in New Zealand and barriers to expansion with high interest rates and building costs.
Zooming out, it's hard to not ask the question, “Are all these tariffs and trade wars good for us?” Things could be totally different by the time this article hits your mailbox. In fact, Trump is moving so quickly and making so many changes, that he could announce that the Jersey cow is the official mascot of the U.S., and it would be the fourth-craziest Trump story of the day.
There is a quote I’ve always loved by Frédéric Bastiat that says, “When goods cross borders, armies don’t.”
I’m not a scholar; it’s the one quote I remember from high school history classes. But, trade is incredibly powerful in forming alliances with other countries. The genesis of unfair trade and tariffs began with the Marshall Plan post World War II. Europe and Japan were in tatters, and the lesson learned from Germany and World War I was to not cripple a country into the stone age, lest their only option be war and attempted global domination. The U.S. created a trade agreement via the Marshall Plan wherein European countries could tariff U.S. goods coming in and the U.S. would not tariff European companies selling into the U.S. This led to a resurgence of manufacturing in Europe and strength in rebuilding.
According to the last tweet by Trump, we are heading to a negotiation where the U.S. will implement reciprocal tariffs. If you have massive tariffs on our imported goods, we will implement similar tariffs on your imported goods. Implementing these tariffs is going to be a messy process that will pick winners and losers. The goal of tariffs is for companies to rehome manufacturing back into the U.S., creating more jobs. The potentially billions of dollars of tariff money will be allowed to reduce or eliminate the income tax. This would lead to fewer barriers to making money and, essentially, tax consumption.
The other variable is the work of Elon Musk and the Department of Government Efficiency (DOGE). He has worked to root out fraud and misallocation of funds. Through his work, they claim to have found billions of dollars of waste and slush money, particularly in the United States Agency for International Development (USAID). Musk has also stated that there are individuals who are 150 years old who are still collecting Social Security. It will be interesting to see over the next 12 months how much of an impact they are able to make on rooting out fraud and corruption to close the $2 trillion federal deficit. While necessary for us to balance the budget, the question remains, “What impact will this have on an economy that is accustomed to having the drug of printed money coursing through its veins?”
The other radical shift is the belief that the U.S. can no longer afford to be the global policeman. This is a shift from a unipolar world to a multipolar world as we step back our influence globally and allow other nations to fill in those voids.
In summary, what are my predictions for 2025? I have no idea.
