Make America Great Again with Agriculture Exports

March 2, 2017 02:06 PM

Agricultural trade has taken a backseat as the Trump administration signed a memorandum to drop out of the Trans Pacific Partnership (TPP) and made plans to renegotiate the North American Free Trade Agreement (NAFTA).

A panel hosted by the Agricultural Business Council of Kansas City expressed the importance of trade to agriculture, especially when it pertains to NAFTA.

“Agriculture is critically dependent on trade,” says Bob Young, chief economist for American Farm Bureau Federation.

Export value the past few years has accounted for roughly 30% of the value of agriculture commodities.

Young points out a climb in export value starting in 2006 when total agriculture exports totaled more than $100 billion. In 2014, approximately $150 billion worth of agriculture goods were exported.

Domestically demand has plateaued Young says as requirements have been met for ethanol, making it vital to continue doing trade with our North American neighbors.

NAFTA has been in existence since 1994, but it could use updates to modernize for changes in the business climate like the rise of ecommerce.

If NAFTA were to be renegotiated it would probably be similar to the updates that were present in TPP, Young says.

Working on his grandfather’s California citrus farm in the 1980’s Neil Herrington saw the impact trade had on the family business as it grew with the aid of more revenue from exports. Herrington now sees the daily impact of trade as the executive director of the Americas for the U.S. Chamber of Commerce.

Herrington points out that all-industry trade with Canada and Mexico has quadrupled since NAFTA was implemented with a combined impact of $1.3 trillion annually.

“For all those who are thinking about renegotiating NAFTA, our request is do no harm first and foremost,” Herrington says.

The U.S. Chamber of Commerce does not encourage doing bilateral trade agreements with Canada and Mexico because of the added costs to businesses versus a trade agreement like NAFTA.

U.S. farmers supply 75% of Mexico’s agriculture imports and 59% of Canada’s share.

“Right now there is a lot of concern with NAFTA and its future,” says Alfonso Navarro-Bernachi, Consulate of Mexico.

Mexico is the third largest agriculture market for the U.S., but several industry sectors benefit greatly from trade across the southern border. The top five traded items to Mexico in 2015:

  1. Corn, $2.3 billion
  2. Soybeans, $1.4 billion
  3. Dairy, $1.3 billion
  4. Pork, $1.3 billion
  5. Beef, $1.1 billion

Because of the current political climate, Mexico has been reanalyzing its position with NAFTA and has been looking at alternative trade partners for agriculture goods. Mexico is currently the largest importer of U.S. corn, but is considering Argentina and Brazil.

Navarro-Bernachi says there is a possibility that Mexico looks to “plan B and plan C for different alternatives in a worst case scenario.”

Prior to NAFTA the U.S. was a net pork importer, exporting just 3%. Last year the U.S. was the largest exporter of pork sending more than 30% to other countries, with Mexico being the primary destination. Canada is the fourth largest U.S. pork buyer.

Total pork exports contribute $46 per head to hog producers and NAFTA accounts for $18.

“NAFTA creates continental integration,” says Kevin Smith, assistant vice president of international sales for Seaboard Foods.

Smith points out that Canada raises plenty of hogs on the western side of the country but imports U.S. pork into its more populated eastern side because it makes sense logistically. The surplus pork raised by western Canadian farmers is exported into Asia.

November and December were record months for U.S. pork exports to Mexico despite a weak peso following the election of Donald Trump.

“It just goes to show you that the supply chain is there. They are bringing in that product regardless of the economic factors they face,” Smith says.

Kansas City Southern Railway (KCS Railway) took on the concession of the Mexican railway in 1996 and invested $4 billion in infrastructure to help maintain the capacity, largely for grain export hauling.

KCS Railway executive vice president corporate affair Warren Erdman believes trade is vital to the rural economy.

“We all want to make America great again,” Erdman says. “If you want to make America to be great you better protect your export markets.”

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Spell Check

Chuck Guyitt
Ridgetown, MI
3/3/2017 03:56 PM

  What hand out do we get from you people? Your corn and beans come over here, the dollar value is exactly the same as you get for your produce. Hogs and cattle again the exchange in the money makes us both equal. Kraft in Toledo Ohio takes our soft white wheat and there is no premium for it [may be on the trucking but that isn't saying a lot]. Thank God you take our milk cows cause we could never eat them all. But trust me you get more in subsidy than we will ever get. Now don't get wrong the dairy and chicken industries are subsidized but thats it. So don't ever think your all alone. PS. I had to use Michigan as my state but really I live cross the st.clair river from Michigan. Also we would be more and welcoming to have some leadership in government like you have now. But that another story. Take care guys.

Pittsburgh, KS
3/2/2017 09:12 PM

  Justin - said it all.

Western, NE
3/2/2017 08:35 PM

  Guess we don't need to let the readers see what sort of trade imbalance we have with Mexico and Canada. The numbers look big for what we export agriculturally so why no numbers on agricultural imports into the US? Bet I can tell you why!!!! Ask how much beef, wheat, feeder pigs and numerous other Ag products are imported into our country. They move all of this over our highways, payed for by our taxpayers and this is all duty free. We have an EPA, state and federal tax along with many other taxes we the people have to contend with that our neighbors to the North and the South do not have. If the information we receive in the articles we read on this website are ment to sway us rather than inform us we should call them out. I do believe it is good to maintain trade with Canada and Mexico. We need to export all we can. But we shouldn't substidize the foreign farmer and cut our own throats hoping to export at a discount. Look around, do you see any other countries letting their AG sector get put at such a disadvantage by the US farmer/rancher like the the US farm/ranch has been facing by foreign countries?


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