A Sigh of Relief


by Kayla Sargent

As the trade war with China rages on, American agriculture producers breathed a small sigh of relief and were quick to praise the Administration for progress on a pro-ag trade deal with Japan.  While at the G-7 summit in France on Sunday, President Trump and Japanese Prime Minister Shinzo Abe announced that a deal is “done in principle.”  Both leaders have  directed their trade teams to accelerate negotiations in order to have a final agreement prepared to sign next month in New York at the meetings of the United Nations General Assembly.

In a Tweet on August 25, President Trump wrote, “Big trade deal just agreed to with Prime Minister Abe of Japan.  Will be great for our farmers, ranchers and more.  Really big corn purchase!”

In a press conference at the summit making the announcement, President Trump blamed the oversupply of corn on China.

“We have excess corn in various parts of our country with our farmers because China did not do what they said they were going to do.  And Prime Minister Abe, on behalf of Japan, they’re going to be buying all of that corn and that’s a very big transaction,” he said.

Prime Minister Abe explained that Japan is facing a pest problem and their corn production has suffered.  Consequently, the private sector can increase purchases to offset their decreased harvest.  He said Japan may need to declare an emergency to accelerate the purchase of U.S. corn.

The National Corn Growers Association (NCGA) was encouraged by the statement, especially as their industry was hit with an additional 10 percent Chinese tariff on both corn and ethanol just two days before.  To make matters worse, in early July, President Trump approved ethanol waivers for large oil companies, reducing the domestic demand for corn.

“An agreement with Japan is an achievement NCGA has long advocated for and a much-needed breakthrough amid some challenging times,” NCGA President Lynn Chrisp said.  “Japan is the second-largest purchaser of U.S. corn and has been an important, longstanding trading partner with America’s corn farmers.  We hope the next stage of negotiations are successful in enhancing rules of trade and building on this strong relationship.”

Chrisp noted that there is still more work to be done on the trade front.  He encouraged the Administration to “continue efforts to gain market access for U.S. products and work to reaffirm its commitment to renewable fuels.”

American Farm Bureau Federation (AFBF) President Zippy Duvall said his organization was still reviewing the details of the agreement, adding that top U.S. agricultural exports to Japan currently include corn, soybeans, wheat, beef and pork.

“We appreciate the Administration’s work to secure greater access for these farm goods and others,” Duvall said.  “This is much-needed good news on the agricultural trade front.”

Japan is the top export market for U.S. beef despite a high tariff rate of 38.5 percent.  Last year Japan purchased $2 billion of U.S. beef, or about one quarter of the year’s total U.S. beef exports, according to National Cattlemen’s Beef Association (NCBA) President Jennifer Houston.

“Removing the massive 38.5 percent tariff on U.S. beef will level the playing field in Japan and we are very thankful to President Trump and his trade team for continuing to fight on behalf of America’s ranching families,” Houston said.

U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom called the agreement “tremendous news” for everyone in the red meat supply chain, not just beef producers.  Halstrom said Japan is the “world’s most competitive red meat import market” and the deal will level the field for both beef and pork.

“It is also a very positive development for our customer base in Japan, which USMEF and our industry partners have spent decades building,” Halstrom said.  “These customers have been very loyal to U.S. pork and beef, but our exports to Japan could not reach their full potential under Japan’s current tariff structure.”

Japan represented 25 percent of total U.S. pork exports last year as well, according to National Pork Producers Council (NPPC) President David Herring.  Exports are critical to American pork producers as roughly 25 percent of all production is shipped to foreign markets.  Dr. Dermot Hayes, an Iowa State University economist, predicts that U.S. pork exports to Japan could grow from last year’s $1.6 billion to more than $2.2 billion over the next 15 years as a result of the deal.

“We look forward to rapid implementation of the agreement as international competitors are currently taking U.S. pork market share through more favorable access,” Herring, a pork producer in Lillington, North Carolina, said.

 

 

One Step Forward, Two Steps Back

by Kayla Sargent

Just two days before the much-praised announcement by the U.S. and Japan, China retaliated against the U.S. with another round of tariffs, again targeting many American agricultural goods.  Starting September 1, tariffs on American soybeans headed to China will increase from 25 to 30 percent and on pork from 50 to 60 percent.  Then, on December 1, tariffs will increase from 25 to 35 percent on corn, sorghum and wheat.

“It’s no surprise that China is slapping even more tariffs on American products,” National Farmers Union (NFU) President Roger Johnson said.  “Every time Trump escalates his trade war, China calls his bluff – why would we expect any differently this time around?  And it’s no surprise that farmers are again the target.”

Over the past three years, U.S. soybean exports to China fell nearly 80 percent, a figure that is likely to get higher after the newest round of tariffs kick in, according to Johnson.  American Farm Bureau Federation President Zippy Duvall explained that in 2017 the U.S. exported $19.5 billion of agricultural products to China.  In 2018, that number was slashed to $9.1 billion due to tariffs and the first half of 2019 is already down from that figure by $1.3 billion, he said.

“China’s announcement signals more trouble for American agriculture.  Continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction,” Duvall said.

Johnson added that times were tough for farmers long before the trade war began taking effect.  Farmer income is half of what it was in 2013 and debt levels are at record highs, he said.  Johnson added overproduction pushing prices lower and extreme weather and high temperatures caused by climate change to the list of challenges farmers face today.

“But instead of looking to solve existing problems in our agricultural sector, this administration has just created new ones.  Between burning bridges with all of our biggest trading partners and undermining our domestic biofuels industry, President Trump is making things worse, not better,” Johnson concluded.

Duvall said “continuing negotiations” is the best route forward.

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