What’s next regarding NAFTA?

American agriculture will have a hard time succeeding without a solid trading relationship with other countries. Now that the Trans-Pacific Partnership is off the table, new President Donald Trump and his administration are now turning their attention to the North American Free Trade Agreement (NAFTA). It’s the first time an administration took a serious look at renegotiating at least parts of the deal since it was signed during the Clinton administration.

NAFTA, Free trade agreement with Canada and Mexico

The Trump Administration still has a goal of renegotiating the North American Free Trade Agreement (NAFTA) with Canada and Mexico in an attempt to make it more favorable for America. (photo from CNN Money)

The National Association of State Departments of Agriculture recently held their winter policy conference in Washington, D.C., and trade was one of the biggest topics of conversation. Nathan Bowen is the Director of Public Policy at NASDA. He says that NAFTA has been a very good thing for agriculture for a long time.

“U.S. agriculture depends on export opportunities for our livelihood,” Bowen said. “With the new administration, there’s a lot of talk about what’s going to happen on the international trade front.”

Bowen says NAFTA has been very important for U.S. farmers and ranchers, who depend on the markets in Canada and Mexico for significant parts of their livelihood. NASDA wants to make sure as the administration looks at redoing NAFTA, agriculture has a place at the table.

“We are working to make sure that agriculture keeps the gains they’ve made under NAFTA,” Bowen said, “and that we do take opportunities that are there to strengthen the agreement. Farmers send a whole range of commodities to markets in both Canada and Mexico.”

He says NAFTA has been good for a whole list of Ag sectors, including beef. U.S. beef exports to Mexico and Canada have almost tripled since the beginning of the agreement. It was a little over $600 million dollars back in 1994, rising to $1.9 billion as recently as 2015.

“The access that U.S. beef has enjoyed in both of those markets has really been important for the industry,” Bowen adds. “The same could be said for corn, with significant gains in that sector, and pork is another really good success story.”

Bowen adds that there really isn’t a timeline for negotiations between the three countries to begin but he’s hopeful it will start as soon as possible so that agriculture will know where it stands with market access to Canada and Mexico.

Here’s the complete conversation with Bowen:

Grains Council Encourages Focus On Expanding Ag Exports

Grain exports are a bright spot in the current farm economy and can grow even further through outreach to the 95 percent of the world’s consumers who live outside U.S. borders, leaders of the U.S. Grains Council said at the at the National Association of Farm Broadcasting (NAFB) convention this week in Kansas City.

US Grains Council Trade Exports

The US Grains Council says American farmers are producing another record grain crop and with 95 percent of the world’s population outside the US, it’ll take trade opportunities to move that product.

As newly-elected national leaders prepare to take office, Chairman Chip Councell, a farmer from Maryland, and President and CEO Tom Sleight told reporters that strong trade policies and robust overseas market development are critical to helping farmers seize these opportunities for growth and greater profitability.

The United States is on track to produce a record amount of corn this year according to U.S. Department of Agriculture (USDA) data out this week, with record exports also expected for feed grains in all forms, a measure that includes corn, sorghum and barley as well as products made with these grains like beef, pork, poultry and ethanol.

U.S. corn exports in September of this year increased 89 percent, to 6.3 million metric tons (248 million bushels), from year ago levels, with shipments to Japan, South Korea, Peru and Taiwan more than doubling. (See more analysis here.)

“Ag exports count for our farmer and agribusiness members and are counted on by customers who rely on the United States for a reliable supply of high-quality commodities and food products. Sales overseas are a bright spot in an otherwise tough ag economy and are something we can all work toward together,” Sleight said.

Though it now seems highly unlikely to get a vote in Congress, the Council also voiced support for the pending Trans-Pacific Partnership (TPP) as an opportunity to reduce tariffs, address vexing non-tariff challenges to U.S. market share and build a platform for future multilateral trade pacts.

“Regardless of the future of TPP, after this election cycle that has made so many here and abroad question the United States’ commitment to open trade, we urge our leadership to champion trade policies and the farm policy programs that help us develop the markets they offer,” he said.

“Doing so will not just help ensure farmer profitability but also help to restore faith in ag trade’s contribution to global food security and our country’s national security.”

The Council is an export market development organization for U.S. corn, sorghum, barley and related products including ethanol and distiller’s dried grains with solubles (DDGS), operating programs in more than 50 countries with the support of farmer and agribusiness members as well as funds from the Market Access Program (MAP) and the Foreign Market Development (FMD) program in the 2014 Farm Bill.

CoBank Report Predicts Easing Of U.S. Protein Glut

DENVER, Colo. (January 21, 2016) —The supply glut that plagued U.S. beef, pork and poultry protein markets last year and ratcheted down margins is expected to ease in 2016, according to a new research report from CoBank.

The bank, a major agribusiness lender, says leading indicators point to animal protein supplies moving toward a state of equilibrium, with protein stocks more in line with overall levels of demand.

Meat Protein supplies expected to ease this year.

Trevor Amen is a protein specialist at Cobank. He expects improving market conditions for US beef, pork, and poultry producers in 2016.

“It’s clear that in the coming year, the headwinds and adverse conditions created by excessive protein stocks are clearing,” said Trevor Amen, animal protein economist with CoBank. “Surprisingly strong U.S. consumer demand helped lay the groundwork for improving market conditions in the coming year, meaning the net trade balance is expected to shift toward growing exports and fewer imports.

“This is welcome news for U.S. beef, pork and poultry producers.”

On the Horizon
In the first half of 2016 protein exports are expected to remain somewhat of a challenge. “But conditions are predicted to improve over depressed 2015 levels due to a variety of economic factors,” added Amen.

Meanwhile, imports of lean beef should slow significantly and domestic consumer demand for beef, pork and poultry is anticipated to remain strong and supportive of prices. Supply imbalances have already begun the correction phase, with supply and demand expected to achieve equilibrium by about mid-year. The strength of consumer demand going forward will impact how much and how soon U.S. meat prices change.

For instance, meat demand in the restaurant sector continues to grow. The Restaurant Performance Index and the Expectation Index each indicate positive restaurant business conditions. Combined with lower gas prices, current consumer attitudes indicate a willingness to spend more at restaurants versus in-home meals during 2016.

Price outlooks are mixed:

  • Pork and chicken prices have an upside potential compared to last year’s low levels, based on adjustments made for future production.
  • Beef prices will likely remain under pressure for the next two years, however, as the industry is coming off cyclical highs of 2014.

Of course, optimism for 2016 should be tempered by the oversupply lessons of 2015.

“Total red meat and poultry production set an all-time high in 2015,” said Amen. “Combined with fewer exports and more imports, total domestic meat supplies surged by 4.4 percent, the highest year-over-year increase in 40 years.” That increase in supply translated to an additional 9 pounds of protein per person—historically, protein supplies rose an average of 0.8 pounds per person per year from 1960 to 2015.

As the market works through the recent protein oversupply hangover, the long-term outlook remains positive, especially with continued global middle class growth. “The increasing demand for a higher-quality diet likely provides domestic protein producers with significant opportunities in the next decade,” concludes Amen.

A synopsis of the 2016 Protein Demand Outlook Report is available at www.cobank.com. The full report is available to media upon request.
Meat Protein supplies expected to level off in 2016, thanks in part to surprising domestic demand and improving exports.

About CoBank
CoBank is a $110 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 75,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture and the nation’s rural economy. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

For more information about CoBank, visit the bank’s web site at www.cobank.com.