Trade talks could put farmers at risk

Written by Ernie Verslues on .

In most business decisions, particularly those made in challenging times, we’ve all been coached to put emotions aside. While it’s true that emotion has no place in feeding, cropping and marketing decisions, there is no substitute for the passion and optimism producers bring to their farming operations.  

Optimism is defined as “anticipating the best possible outcome.” Producers truly are eternal optimists. You don’t need to look any further than the impact of current commodity values and policies that impact your production, particularly trade.

Trade with other countries is critically important to price strength and stability for agricultural production as well as food security in the United States. It provides lower food prices for all consumers.

Given the importance of exports, most people in agriculture are concerned about the Trump administration’s approach to trade. One of the first actions on trade was to pull out of the Trans Pacific Partnership (TPP), an agreement that had future growth potential.  

Another action of this administration was to renegotiate the North American Free Trade Agreement (NAFTA), a decades-old deal that provides both immediate and future benefits to agriculture. The industry is working with leaders to approach any updates with a “do no harm” approach. At risk is an unknown impact on approximately one-third of all products exported by US farmers.

Sellers of commodities are price-takers. That makes expanding export markets important. The more potential buyers you create, the more opportunity you have to increase price through competition.

Through hard work by private and government negotiators in past years, we have managed to drive agricultural exports in a positive direction. We have to be realistic about the effort it takes to keep these markets. The effort will never end; there is too much world competition to rest on our current status. There may be new and innovative ways to create more opportunities, but we also need pay attention to what has worked and the consequences of disassembling existing trade agreements.

Beef is a good example. According to USDA statistics from 2017, the top five destinations for U.S. beef included Japan, South Korea, Mexico, Canada and Hong Kong. Together, they accounted for 83 percent of total U.S. beef exports. All of these countries are watching U.S. trade signals carefully. New Zealand, Australia and Canada have surplus beef and would greatly benefit from enhancing their exporter position with Pacific Rim countries.

Other major beef exporters, Brazil and Argentina, are somewhat priced out of the Asian markets by higher transportation costs, but these countries have an eye on increasing exports to Mexico, the United States’ second-largest beef customer. Obviously, we have great logistical advantages to export all agricultural products to Mexico. However, reliability and predictability are priced into negotiations. We can’t assume we will always have Mexico’s business. We could lose some of it at a time when any reduction of demand for U.S. commodities is particularly painful for farmers.

When looking at the consequences of NAFTA withdrawal on all 50 states, Missouri was listed as having the fifth-highest negative impact. It would put 250,000 jobs at risk along with approximately 80 percent of the grain and oilseed exports from the state. These numbers pale in comparison to the impact on the entire U.S.

Our leaders must evaluate this impact when making policy decisions that impact the livelihood of our producers. There are enough risks inherent in the agricultural vocation. You don’t need your success left to chance.  

We all need a little luck. And I’ve always been told that luck is when preparation meets opportunity. I know each of you are well prepared, and I hope you will get the opportunity you deserve.

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