From farm to table: How US policy realignment will affect agriculture

One of the top risks that we highlight in the EY 2021 Geostrategic Outlook is US policy realignment under the incoming Biden administration. President-elect Biden has declared a focus on strengthening industrial and environmental policies, and volatility is also likely in immigration, anti-trust and trade policy—although the extent of these changes will vary based on the outcome of the Senate runoff elections in Georgia.

This broad-based policy realignment will affect companies across a variety of sub-sectors. As was evident in the unusually high level of debate around Biden’s pick for Secretary of Agriculture, these macro policy realignments will have significant effects on the agricultural and food sectors. Companies in the agricultural sector should expect improvements in the trade environment, but a more complicated domestic environment as concerns about climate change, labor rights, and competition drive government policy. Agriculture and food companies should prepare for six areas of expected policy change.

1. Climate change

The Biden transition team has indicated that the incoming administration plans to take a whole of government approach to environmental policy to deal with the challenge of climate change. And agriculture has been mentioned explicitly as part of any action on climate change because it is increasingly viewed as having significant potential to both cut and offset emissions. There are likely to be three pillars to agriculture’s role in climate change mitigation under Biden: incentives for climate-friendly agriculture, government support for biofuels, and stricter environmental regulations. On the latter, Biden is likely to use executive actions to restore many Obama-era environmental regulations—although these actions could be challenged in court, creating further policy uncertainty.

2. Innovation and industrial policy

The Biden administration will seek to invest heavily in American innovation, targeting US$300 billion in research and development. Agriculture and food production more broadly could play a key role in these efforts. Biden plans to reinvest in land grant universities’ agricultural research. He will also seek to help farmers leverage new technologies, techniques, and equipment through providing low-cost finance for the transition to new equipment and methods. And there are indications the Biden administration will support innovation in molecular fermentation of animal proteins and so-called "lab meat" to help reduce the carbon footprint of protein consumption.

3. Antitrust

Following the House Judiciary Committee’s sweeping antitrust report in October 2020, the Biden administration is also likely to take a more aggressive and systematic approach to antitrust enforcement. While the technology sector is the immediate target, important Democratic voices have raised concerns over market concentration in the meat processing industry in the wake of vulnerabilities exposed by the COVID pandemic. The concentration of the paycheck protection program (PPP) recipients among larger producers and the challenges created by larger processors for smaller agriculture producers have also raised the profile of this issue politically—and could lead the Biden administration to respond.

4. Labor and immigration

Protecting essential workers is likely to an early focus of Biden’s COVID-19 response. In the agriculture and food sectors, this will include developing and enforcing emergency temporary standards on PPE and social distancing at processors to protect workers and help to build more resiliency and capacity in processing facilities. Such steps will be driven by a desire to avoid having the shutdown of one or two facilities causing a major disruption in food supply, as we saw earlier this year. Longer term, new labor protections are expected to force larger agricultural companies to be more transparent, follow Occupational Safety and Health Administration (OSHA) regulations, and pay overtime. At the same time, Biden will seek to provide a path to legalization for agricultural workers who have worked for years on US farms, providing more consistency and stability in the labor pool for farms and agriculture companies.

5. Food and nutrition

The Biden administration is also likely to take more action on nutrition education and dietary guidelines. One likely action will be to reverse the Trump administration’s cuts to the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps). Obama-era regulations that gave food stamps extra value if they were used at farmers markets or on organic food may also be revived. Food safety regulations are likely to be tightened as well. The COVID-19 pandemic will incentivize greater funding for the Animal and Plant Health Inspection Service due to fear of additional animal-borne diseases. In addition, country of origin labeling for meat and some other food products are likely to be reinstated.

6. International trade

The broad use of tariffs as tool of trade policy is likely to decline, or in some cases even revert to MFN levels, even as restrictive trade actions become more targeted at those the US considers to be strategic competitors. In aggregate, this should help to reduce the scale of retaliatory tariffs US agriculture exports currently face. The challenge for the new administration will be how to navigate the legacy tariffs it inherits from the current administration (e.g. 301 and 232 based tariffs), as domestic politics make it challenging to end tariffs unilaterally, particularly on Chinese products. President-elect Biden has signaled that trade deals are not a priority, at least initially. Rather the focus will be on domestic economic renewal. It’s debatable whether that approach is sustainable beyond the short term as strategic and economic imperatives may put trade agreements on the administration’s agenda. For instance, the agricultural sector will suffer as other countries continue to negotiate market openings with each other, potentially at the expense of US agriculture exports.  

“Is this Heaven?”

No, it’s more mixed. The policy outlook for the agriculture and food sectors under the Biden administration will provide both opportunities and challenges. Companies in the agricultural and food sectors should determine how their supply chains, operations, and export markets are likely to be affected by shifts in domestic and trade policies. They should also prepare for likely shifts in climate change and energy-efficiency standards and seek to capitalize on the opportunities that these changes provide for agricultural producers. These policy changes will contribute to the reimagining of the food system. Agility and resiliency will therefore continue to be an imperative for companies across the food ecosystem.

This article was written in collaboration with Douglas Bell, EY Global Trade Policy Leader. The views expressed here are ours alone and do not necessarily represent those of EY.