In this file:
· As Trade War With China Rages On, U.S. Shouldn’t Involve Mexico—For The Ag Sector's Sake
· U.S.-Mexico Showdown Puts $45 Billion Food Trade in Cross Hairs
As Trade War With China Rages On, U.S. Shouldn’t Involve Mexico—For The Ag Sector's Sake
Donald Marvin, Contributor, Forbes
Jun 4, 2019
The recent breakdown of U.S.-China trade talks hangs an economic cloud over U.S. agriculture. But, ironically, the escalated trade disputes with China could, in the end, be a catalyst propelling progress on a couple of other key trade negotiations: the U.S-Japan Free Trade Agreement and perhaps approval of the recently negotiated U.S.-Mexico Canada Agreement (USMCA), if the U.S. and Mexico can come to terms over the latest immigration-related tariffs announced by the U.S.
Indeed, the U.S.-Mexico trade situation is a case of two steps forward and one step back. Until late last month, standing in the way of USMCA approval were the remaining U.S. tariffs on Canadian and Mexican steel and aluminum as well as Mexico and Canada's counter-tariffs slapped on more than $15 billion in U.S. exports. Now that the three nations have agreed to end all these tariffs, a new complication has arisen: promised U.S. tariffs on Mexican goods tied to that country’s efforts on stemming illegal immigration. And, of course, Mexico’s promised counter tariffs. Further talks over these duties are ongoing in Washington, D.C.
For the past year, tariffs have hit export-dependent U.S. agriculture particularly hard, and that is a concern for the agtech sector which serves the industry. Perhaps nothing better illustrates the ripple effect from the ports down to the crop inputs that farmers use in their fields than looking at the importance of trade for the red meat and poultry sector—a top target of retaliatory tariffs.
Last year, the U.S. exported 13.5% of its beef production, 17% of its chicken production, and nearly 26% of total pork production. The 2018 exports of beef, pork and chicken represented an estimated 667 million bushels of corn and 178 million bushels of soybean used as feed. According to a study commissioned by the U.S. Meat Export Federation, red meat exports alone accounted for 11% of the price of a bushel or corn, and 9% of the price of a bushel of soybeans last year. Without red meat exports, America’s corn and soybean producers would have lost an estimated $9.6 billion in revenues in 2018.
While trade tensions with China still plague U.S. agriculture, potential breakthroughs with other top markets, especially Mexico and Japan, could be a much-needed salve to the hurting farm economy, starting with meat and poultry.
For example, over the past 10 years, pork export volume to Mexico increased nearly 60%. Mexico is the largest overall import customer of U.S. pork and in 2017 purchased more pork from the United States than any nation has ever purchased from another, some 800,000 metric tons valued at more than $1.5 billion. The 20% retaliatory tariffs imposed by Mexico last year on U.S. pork ended a six-year streak of record-setting shipments.
As for Japan, it is the largest volume market for U.S. beef, and the second largest for U.S. pork. Moreover, it’s the largest market in terms of value for both, totaling a combined $3.6 billion in sales last year, an amount that has more than tripled in the last decade. However, because of Japan’s trade deals with the EU and other exporting nations through the 11-nation Comprehensive and Progressive Trans-Pacific Partnership (CP-TPP), U.S. meat exports are now at a tariff-rate disadvantage there, and market share is starting to slip.
Renewed trade talks with Japan are critical, just as is restoring the zero-tariff access to Mexico that existed under the original NAFTA agreement. Of course, the agtech sector will potentially be a key beneficiary of the future stability and growth of U.S. agricultural exports and their overall economic impact. The farm economy has been in a bearish cycle in recent years. During 2015-2018, net farm income was down about 25% from its 2011-2014 average levels. Nonetheless, agtech innovations have been exploding, due to the fact that they create value for farmers and ranchers through much-needed cost savings and efficiency gains.
Future growth for U.S. agriculture, however, will depend primarily on demand coming from outside the U.S...
U.S.-Mexico Showdown Puts $45 Billion Food Trade in Cross Hairs
Shruti Date Singh and Kevin Varley, Bloomberg
via Yahoo Finance - June 4, 2019
(Bloomberg) -- Meat and grains, fruits, vegetables and even sugar. These are the dinner-table goods that are regularly imported back and forth between Mexico and the U.S.
About $26 billion in farm and food goods moved north to the U.S. in 2018, while $19 billion in such items traveled south to Mexico, according to lender CoBank ACB. U.S. President Donald Trump has threatened to impose 5% tariffs on imports from Mexico starting on June 10, rising to 25% in October if the country doesn’t meet his immigration demands.
If the tariffs do reach 25%, the cost to U.S. importers could be $6.5 billion based on the dollar amount bought from Mexico in 2018, the Greenwood Village, Colorado-based lender advised. If Mexico retaliates, dinner tables on both sides of the border could be affected.
“Things will become more costly for the American consumer,” if the tariffs climb to 25%, said Dan Kowalski, vice president of research for CoBank.
In mid-May, the removal of U.S. tariffs on steel and aluminum from Canada and Mexico lifted hopes for...