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Ag moves forward after elections

Jeff Caldwell 11/07/2012 @ 9:20am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The 2012 elections are in the books. President Barack Obama will serve another 4-year term, while the Democratic party retains control of the Senate and the Republican party keeps control of the House of Representatives.

So, what's it all mean for agriculture? The early consensus is that, in the short term, the election results likely will be overtaken by ag fundamentals in the grain marketplace. In the longer term, there are macro-level variables that Tuesday's elections could influence the industry farther down the road.

The big picture

Wednesday morning saw a feeling of disappointment in Tuesday's presidential vote on the CME Group trading floor, says Trean Group Options specialist and Agriculture.com Market Analyst Scott Shellady. It's spawned more question marks early Wednesday, both on the macro level and fundamentally to agriculture.

"The 'fiscal cliff' now looms as well as Friday's [USDA crop production] report," he says. "Traders are pretty disappointed. There's still a ton of uncertainty."

The "fiscal cliff" Shellady says is now on many traders' minds refers to tax rates that are set to increase on January 1, 2013, without action by Congress, which Shellady says isn't likely until as late as the second quarter of 2013.

"One change that all taxpayers should be aware of is on January 1, 2013 the tax rates will be increasing for all Americans. What? Didn’t our candidates say they would not be raising taxes?" says Ohio State University Extension economist David Marrison. "Actually, Congress did not vote to increase your taxes, but rather are allowing the Bush-era tax reductions enacted in 2001 to expire. Thus higher rates will return in 2013."

Still, others are cautiously hopeful that there will be action on this issue in the coming weeks.

"Americans reelected President Obama and left Congress split with Democrats in charge of the Senate and Republicans in charge of the House," says John Roach of Roach Ag Marketing Ltd. "Maybe Washington will be more willing to take on the hard decisions, but that is more likely wishful thinking than reality."

No huge changes 

From the farm policy standpoint, experts don't expect huge changes based on Tuesday's election results. Jay O'Neil, senior ag economist at Kansas State University, told Dow Jones Newswires that farm payments could see slight cutbacks in the next year, but those cuts will be in line with similar cuts in spending throughout the federal budget.

Beyond the farm program and the next farm bill -- which lawmakers say will be taken up again soon -- biofuels policy is another area where Tuesday's outcomes won't have a huge effect. MaxYield Cooperative industry analyst Karl Setzer told Dow Jones Newswires Wednesday that he doesn't expect issues pertaining to ethanol blending and requirements at the federal level to change much, at least in the near term.

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