Tag Archives: Trade

Prime Minister Justin Trudeau and U.S. President Donald Trump are to discuss continental trade and their shared challenges with China in a meeting in Washington next week.

The Prime Minister’s Office says the leaders will use next Thursday’s meeting to talk about the ratification of the new North American trade agreement and outstanding trade disputes between Canada and the United States.

The meeting will also give Trudeau and Trump an opportunity to discuss strategy ahead of the G20 leaders’ summit in Japan at the end of the month, which will give them face time with Chinese President Xi Jinping.

Trudeau and Trump will also talk about two Canadians detained in China for the last six months.

In December, China detained Michael Kovrig and Michael Spavor in apparent retaliation for the RCMP’s arrest of a Chinese high-tech executive on a U.S. extradition warrant.

Canada is caught between its two biggest trading partners on that issue, with Trudeau insisting Canada has to follow the rule of law but having no luck pressing the case with China’s leaders.

Besides the Kovrig and Spavor cases, China has obstructed shipments of Canadian agriculture products such as canola and pork, claiming that they’re ridden with pests or have labelling problems. On Thursday the government promised that Export Development Canada will put up $150 million in additional insurance backing for canola farmers looking to sell in new markets.

U.S. Vice-President Mike Pence has said Trump will press Xi to release Kovrig and Spavor and will link the plight of the two Canadians to broader trade talks between Washington and Beijing. Global Affairs Canada says Spavor received his eighth consular visit from Canadian diplomats on Thursday, one day after Kovrig’s latest visit.

While Trudeau and Trump have crossed paths at various international events in the last year, and had several telephone conversations, this will be their first substantive meeting since the U.S. president insulted the prime minister a little over a year ago after departing the G7 in Quebec.

The two leaders have continued to engage because both governments needed to wrestle a conclusion out of the often acrimonious renegotiation of the North American Free Trade Agreement, which Trump forced on Canada and Mexico.

Now, with the recent removal of U.S. tariffs on Canadian and Mexican steel and aluminum imports, there is renewed momentum to ratify the new trade pact.

Mexico’s Senate is expected to give its final legal approval to the new deal next week, but a delicate political dance continues between Ottawa and Washington over ratification. Trudeau has tabled the government’s ratification bill and it is winding its way through Parliament — slowly — ahead of next week’s adjournment of the House of Commons.

Canadian government sources have said the House could be recalled after its summer recess, in a last session before the October federal election, to deal with ratifying the new NAFTA if the U.S. Congress doesn’t deal with the matter promptly. As much as the government wants to move “in tandem” with the U.S. toward final approval of the new agreement, it doesn’t want to get too far ahead.

Some Democrats in the House of Representatives are less enthusiastic about the new deal, and some would like to deny Trump a trade victory. Some Democrats have said they want to see stronger provisions on labour and environmental standards in Mexico but that country’s lawmakers have approved a new labour-reform law that has won plaudits in Ottawa and among many other lawmakers in Washington.

Foreign Affairs Minister Chrystia Freeland concluded a two-day visit to Washington on Thursday, meeting two leading Republican and Democratic senators. A day earlier, Freeland discussed trade with U.S. trade czar Robert Lighthizer and China with Secretary of State Mike Pompeo.

Expanding U.S. export markets is vital to the success of American pork producers, but trade disputes with some of our top markets, most notably China, are hampering growth and have caused severe financial harm to U.S. hog farmers, National Pork Producers Council Vice President and Counsel of Global Government Affairs Nick Giordano said today at a Global Business Dialogue event in Washington, D.C.

“Mostly because of free trade agreements, the United States is the leading global exporter of pork. As a result, U.S. pork is an attractive candidate for trade retaliation. America’s hog farmers – and many other sectors of U.S. agriculture – have been at the tip of the trade retaliation spear for more than a year,” Giordano explained to the briefing at the National Press Club.

 

While Mexico’s 20 percent retaliatory tariff on U.S. pork was recently lifted, America’s producers still face a stifling 62 percent tariff into China. There are enormous trade opportunities with China, especially to help offset reduced domestic production due to African swine fever (ASF), a pig-only disease with no vaccine treatment that poses no human health or food safety risks, but that is almost always fatal for hogs, Giordano noted.  ASF has spread to every province in China, other parts of Asia and in Europe.

Giordano said NPPC is working with the U.S. Department of Agriculture and Customs and Border Protection to strengthen biosecurity at our borders and on our farms to prevent its spread to the United States.

“We have always known that China holds more potential than any market in the world for increased U.S. pork sales. But, today, because of African swine fever, that potential is off the charts, offering the single greatest sales opportunity in our industry’s history,” said Giordano. “China needs reliable suppliers of pork now, and likely, well into the future. The question U.S. hog farmers are asking: ‘Will we get the main course, or will we get the crumbs off the table?'”

“For most of the last year, the U.S. pork industry has the dubious distinction of being on three retaliation lists: China and Mexico related to U.S. actions under Section 232 of the Trade Expansion Act of 1962 and China in response to U.S. tariffs imposed under Section 301 of the Trade Act of 1974,” Giordano said. Last year, Mexico was the industry’s largest volume market and China was the third top market by volume, although punitive tariffs imposed by those two countries have cost U.S. pork producers $2.5 billion over the last year.

“U.S. pork production costs are among the lowest in the world with safety and quality that are second to none. But for the retaliatory duties, the United States would be in a perfect position to take advantage of this massive import surge in the world’s largest pork-consuming nation and single handedly put a huge dent in the U.S. trade imbalance with China,” Giordano said. Instead, Chinese pork buyers are reaching out to those in Europe, Canada and Brazil for supplies. “What should have been a time of enormous prosperity and growth for U.S. pork producers and their suppliers will instead fuel jobs, profits and rural development for our competitors,” he noted.

“U.S. hog farmers understand the challenges faced by this administration in recalibrating U.S. trade policy toward China. The issues are myriad and complex. Moreover, hog farmers appreciate the farmer aid packages that the administration has put forward,” Giordano continued. “However, the China pork tariff needs to be lifted.”

Giordano’s full remarks can be read here.

LINCOLN — Nebraska Department of Agriculture (NDA) Director Steve Wellman announced the creation of an International Grow Nebraska Agriculture trade team within NDA’s Ag Promotion and Development focus area. The team will be led by NDA Assistant Director Amelia Breinig.

“Trade is important to Nebraska and the creation of this trade team broadens the base of our international trade responsibilities,” said NDA Director Wellman. “NDA has always been dedicated to promoting agriculture abroad. This new trade team structure puts a renewed emphasis on international trade.”

NDA’s international trade team focuses on the sales, promotions and value-added aspects of Nebraska agricultural products in the international marketplace. Team members continue to promote new opportunities for international trade as well as support existing relationships with our current trading partners. The international trade team consists of Mark Jagels, Angel Velitchkov and Jordan Schlake.

In the area of international trade, NDA is currently working on increasing: livestock exports to South America; dry edible bean exports to Bulgaria; and pork, beef, dry edible beans and soybean exports to Vietnam. For 2019, Governor Pete Ricketts has scheduled trade missions for Vietnam and Japan in September and Germany in November. In the next year, NDA is set to host multiple delegations visiting Nebraska on reverse trade missions.

Australian Prime Minister Scott Morrison said Friday that the World Trade Organization needs mending to keep up with the times.

Morrison said many leaders attending the Group of 20 summit in Osaka later this month share the view.

“There is a strong consensus about the need to modernize the WTO and its rules,” he said.

“We need to mend it, we don’t need to break it, and mending it requires a lot of partnership,” he added. “Just now it’s the technical practical things that need to get done.”

Morrison, who spoke at a lunch organized by the Australian Chamber of Commerce in Singapore, didn’t go into the specifics of what needed to change.

But he referred to a “very practical” speech by Singapore Prime Minister Lee Hsien Loong at an annual security conference last week.

Lee said multilateral institutions like the WTO were “far from perfect” and in need of reform.

“Multilateral global deals like the Uruguay Round are no longer practical, when agreement requires a full consensus among 164 member countries of hugely diverse interests and philosophies,” he said.

“Furthermore, the WTO was designed for an agricultural and manufacturing-based world economy, but the world has moved on to services and now increasingly digital and intellectual property, which need much more complicated rules,” Lee added.

Morrison is on his first overseas trip after a shock election victory in May. It includes stops at the Solomon Islands, Britain and Singapore.

Mexico is warning of possible retaliation if President Trump moves forward with planned tariffs on Mexico due to border crossings. Mexican officials flew to Washington over the weekend ahead of a planned summit Wednesday.

President Trump over the weekend continued his pressure on Mexico, taking to Twitter to say, “We want action, not talk,” regarding the border crisis. Trump says he will impose the tariffs to pressure Mexico to block Central American migrants from crossing the border into the United States. Those tariffs would increase by five percent every month through October, capping at 25 percent. Advocacy group Farmers for Free Trade says in a statement the move by Trump “will likely invite retaliation on the products we export to Mexico,” including agricultural products, electronics, and car parts, among others.

The group says tariffs on imports from Mexico could lead to $25 billion in higher costs for American consumers. The tariffs promised by Trump were announced as the U.S.-Mexico-Canada Agreement made progress towards implementation in all three member countries last week.

The National Pork Producers responded to President Trump’s plan to impose a five percent tariff on all Mexican imports by June 10. NPPC President David Herring appealed to Trump to reconsider his plans to open a new trade dispute with Mexico. “American pork producers cannot afford retaliatory tariffs from its largest export market which Mexico will surely implement,” he says. “Over the last year, trade disputes with Mexico and China have cost hard-working U.S. pork producers and their families about $2.5 billion.”

Herring is asking Washington to move forward with ratification of the U.S.-Mexico-Canada trade agreement and preserve zero-tariff pork trade in North America for the long term. “We’re also asking for a trade agreement with Japan,” he says, “as well as a resolution to the trade dispute with China. U.S. pork has a historic opportunity to make inroads into the Chinese market as the country continues to struggle with the African Swine Fever outbreak.” For most of the past year, American pork farmers have lost about $12 per hog due to trade retaliation by Mexico, which recently lifted the retaliatory tariffs last week.

Those numbers come directly from Iowa State University Economist Dermot Hayes, who says U.S. pork producers will lose the entire Mexican market if they face protracted retaliation. Mexico brought in 20 percent of total U.S. pork exports last year.

(THE CONVERSATION) Soybeans may not seem all that useful in a war. Nonetheless they’ve become China’s most important weapon in its ever-worsening trade conflict with the U.S.

China, the world’s biggest buyer of the crop, has reportedly stopped purchasing any American soybeans in retaliation for the Trump administration raising tariffs on US$250 billion of Chinese goods. This is very bad news for U.S. farmers.

While China’s targeting of soybeans may have come as something of a surprise to most Americans, to a professor of agricultural economics who studies international commodity markets for a living, this was not at all unexpected.

Even before the conclusion of the 2016 presidential race, trade analysts were already weighing the possibility that China might impose an embargo on U.S. soybean imports based on protectionist rhetoric from both candidates.

As a result, with the trade war in full swing, American soybean farmers are now among its biggest losers. Here are a few figures that show why.

Soybeans, by the numbers

Soybeans are a crucial part of the global food chain, particularly as a source of protein in the production of hogs and poultry.

The importance of China as a market for soybeans has been driven by an explosion in demand for meat as consumers switch from a diet dominated by rice to one where pork, poultry and beef play an important part. Chinese production of meat from those three animals surged 250% from 1986 to 2012 and is projected to increase another 30% by the end of the current decade. However, China is unable to produce enough animal feed itself, hence the need to import soybeans from the United States and Brazil.

In 2017, the U.S. accounted for $21.4 billion worth of global soybean exports, the second largest after its main competitor Brazil, which exported $25.7 billion.

Meanwhile, in 2017 China accounted for the lion’s share of global soybean imports at $39.6 billion, or two-thirds of the total.

Back in 2017, that was good news for American farmers, when U.S. exports made up about a third of Chinese purchases, or $13.9 billion. That made soybeans the United States’ second-most valuable export to China after airplanes.

But U.S. exports to China have fallen dramatically since China slapped a 25% tariff on Americans soybeans last April as part of its initial response to President Donald Trump’s trade war.

In the current farm marketing year, which began Sept. 1, U.S. farmers have exported just 5.9 million metric tons of soybeans to China, compared with an average of 29 million at the same point during the previous three years – or about 80% less.

That’s why the tariffs have tremendous potential to hurt farmers in my state of Ohio, where soybeans were the number one agricultural export in 2017 at $1.3 billion. China is the state’s largest export market.

And yet nationally, Ohio is just the seventh-largest exporter of soybeans, after Illinois, Iowa, Minnesota, Nebraska, Indiana and Missouri, all of which are suffering from the tariffs.

Not only do farmers stand to lose out by giving up market share to Brazilian farmers, but soybean prices at the port of New Orleans have fallen as well and are currently $9.35 a bushel compared with $10.82 per bushel a year ago. This has hurt incomes and created a double whammy for Midwest farms.

This is of course why the Chinese chose to place a tariff on U.S. soybeans in the first place. Farmers will hurt a lot, and soybeans are produced in states where many of them voted for Donald Trump. China’s hope, presumably, is that farmers will lobby the administration to step back from further escalation of the trade war.

That seems unlikely, given the $28 billion in aid the Trump administration is offering farmers to soften the blow and the possibility of higher tariffs on an additional $325 billion worth of Chinese imports. At this point it looks like both sides are hunkering down for a prolonged trade war.

This is an updated version of an article original published on April 5, 2018.

This article is republished from The Conversation under a Creative Commons license. Read the original article here: http://theconversation.com/how-soybeans-became-chinas-most-powerful-weapon-in-trumps-trade-war-118088.

 In response to President Trump’s plan to impose five percent tariffs on all Mexican imports as of June 10, 2019, David Herring, president of the National Pork Producers Council and a pork producer from Lillington, North Carolina, issued the following statement:

“We appeal to President Trump to reconsider plans to open a new trade dispute with Mexico. American pork producers cannot afford retaliatory tariffs from its largest export market, tariffs which Mexico will surely implement. Over the last year, trade disputes with Mexico and China have cost hard-working U.S. pork producers and their families approximately $2.5 billion.

“Let’s move forward with ratification of the United States-Mexico-Canada trade agreement, preserving zero-tariff pork trade in North America for the long term; complete a trade agreement with Japan; and resolve the trade dispute with China, where U.S. pork has a historic opportunity to dramatically expand exports given the countries struggle with African swine fever.

“We hope those members of Congress who are working to restrict the administration’s trade relief programs take note. While these programs provide only partial relief to the damage trade retaliation has exacted on U.S. agriculture, they are desperately needed. We need the full participation of all organizations involved in the U.S. pork supply chain for these programs to deliver their intended benefits.”

For most of the last year, U.S. pork producers have lost $12 per hog due to trade retaliation by Mexico, which was lifted last week, according to Iowa State University Economist Dermot Hayes. Dr. Hayes projects that the U.S. pork producers will lose the entire Mexican market, one that represented 20 percent of total U.S. pork exports last year, if they face protracted retaliation. As of April 1, 2019, the value of U.S. pork exports to Mexico were down 28 percent from the same period last year.

Japan and the U.S. are accelerating trade talks in hopes to reach a quick agreement. Japanese Prime Minister Shinzo Abe  indicated the U.S. and Japan will speed up trade talks as Tokyo faces increased pressure to reach a deal in the next six months to avoid auto tariffs.

However, Politico reports talks between the two likely won’t advance quickly until after Tokyo’s election in July. Trump, ending a summit and visit to Japan, says agriculture products are “heavily in play” in the talks, particularly U.S. beef. Farmers in the U.S. are eager to see an agreement since Japan and other nations entered the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, after the U.S. left the then-called Trans-Pacific Partnership in 2017.

Trump suggested an announcement on parts of an agreement could come sometime in August. Trade experts expect a deal to take longer, however, as the talks, focusing on automobiles and agriculture, will take more time than predicted by the U.S. and Japan.

This spring’s planting decisions may be as clear as mud, yet they carry heavy financial consequences.

“You couldn’t have planned this to be more confusing,” said University of Illinois economist Gary Schnitkey. “The falling out of the trade deal happened right when we were getting to the point of planting corn.”

Then, persistent heavy rains across wide swaths of the Corn Belt kept farmers from their fields, forcing many producers to weigh their options: take a prevented planting payment from crop insurance, plant corn but with lower insurance coverage levels or switch to soybeans.

“So it just becomes a point of looking for the alternative that you think has the highest expected return, even though it’s probably not the return that you’d like,” he said. Many farmers will still be looking at negative incomes as they put pen to paper.

VARIOUS FACTORS

Farmers have to factor in their local weather forecast, fluctuating markets and USDA’s revised Market Facilitation Program. USDA released its proposal on Thursday afternoon — $14.5 billion of direct payments to farmers with a rate based on county-level trade impacts and the total acreage a farmer plants to eligible commodity crops.

“They’ve tried to structure it in a way that doesn’t necessarily favor switching to soybeans sooner, which is what a lot of people were worried about, but it does suggest that people who get toward the end of that (soybean) planting window might wind up stretching it a little farther,” Jim Mintert, director of the Center for Commercial Agriculture at Purdue University, said in a webinar.

While that program could help lift farmers’ bottom lines, USDA hasn’t released payment rates, which it says will be based on trade losses at the county level. (For more details on how the program would work, please read https://www.dtnpf.com/….)

“USDA is going to have to provide some clarification as far as how those payments are going to be computed, but if our interpretation is on track, it’s going to discourage prevented planting,” Mintert said.

DEPENDS ON LOCATION

Determining whether it’s worth it to continue planting corn after the final planting date, which is sometime between May 25 and June 5 depending on where you are in the Corn Belt, is complicated.

Farmers have to consider whether they’ll have a window to plant, what they may be giving up in yield, changes to their insurance protection levels and whether they believe they’ll be able to sell the crop at a profit. Many of those are still moving targets.

Robert Nielsen, Purdue Extension agronomist and corn specialist, said planting date is only one factor in determining yields. After about the middle of May, corn yields decline approximately 1 to 2 bushels per acre per day. So, if you plant corn on June 10, you’re looking at a yield loss of about 30 to 60 bushels per acre.

“That still doesn’t tell us what the actual yield will be at the end of the season,” he said on the webinar. For example, if the rest of the season turns out perfectly, yield potential could have been 260 bushels per acre. Subtract 60 bushels because you planted late, and you’re still looking at a 200 bpa yield. But if the rest of the summer has poor growing conditions, that topline yield could fall to 200 bpa, leaving you with a yield of 140 bpa.

“I accept the fact that we lose yield as we delay planting, but that doesn’t tell me what the actual yield will be at the end of the season, and so we’re playing these what-if scenarios trying to budget in numbers that require yields, not loss. It’s really what’s going to happen the remainder of the season that’s going to dictate the actual absolute yield,” Nielsen said.

TOUGH DECISION

Michael Langemeier, associate director at Purdue’s Center for Commercial Agriculture, said he thinks there’s a danger farmers could pull the plug on corn planting too soon because they’re wary of the yield impact. “If the yield drops are not very big, corn does look like it’s more profitable and has less downside risk than soybeans. It’s a tough decision this year.”

DTN Lead Analyst Todd Hultman concurs that there’s more profit potential in corn this year, even though the marketing year got off to an unusual start. Noncommercial traders made record-large bearish bets early in the season based on the size of Brazil’s and Argentina’s crops. That pushed prices down this spring, limiting farmers’ pricing opportunities.

“So, for a while, it looked like the seasonal pattern in corn wasn’t really forming up, and that actually happens, maybe, one out of four years,” Hultman said. “When it does, we usually see a seasonal peak come later in the year than it normally does.”

Now, with the wet spring and inability to plant corn in May, those noncommercials are being forced to cover their positions, putting the market in a bullish situation. Hultman said it’s tough to guess how high the market will go.

“The planting problem is for real. It’s not because it’s exaggerated by anybody yet,” he said. “The noncommercials being that heavily short just adds fuel to the fire. I think we can continue to bet on higher corn price.”

MARKETING UPSIDE

Mintert said the upside from a marketing standpoint is “clearly on the corn side because it looks like we’re going to pull some acres away from corn, maybe tighten up the supply a little bit. On the soybean side, the failure to negotiate the trade agreement with China is huge.”

The 2018-19 stocks-to-use ratio for soybeans, at 25%, is the highest it’s been since the 1980s.

“If we chart ending stocks-to-use ratios compared to where they have typically traded in the past, we’re talking about cash soybean prices with a $6 in front of them,” Hultman said. “The bearish potential for this situation we’re in is clear and very hard to argue. Why would anybody plant soybeans in that situation? But if they can be assured of getting a bonus check, that certainly might help them.”

Hultman has recommended DTN customers establish a price floor under their 2019 soybean production by buying out-of-the-money puts. A put option allows the owner the right, but not the obligation, to sell the underlying commodity at a set price. When he initially made the recommendation, those options were less than a nickel per bushel. Despite that option price more than doubling to date, Hultman says there is still potential in the strategy.

“This year, I don’t think we can say it’s really a bad price yet because of the potential downside risk.”

For farmers looking to cash in on the corn market’s rally, Hultman suggests a mix of old-crop and new-crop sales. He’s recommended farmers price up to 25% of new-crop corn, being careful not to overestimate their production potential. For old-crop sales, he suggests pricing another 25%.

“That can certainly help boost their cash position, and if we get a little more here in the next few weeks, that would help a lot too,” Hultman said. He suggests feeding this rally, instead of trying to catch the top.

“The big picture for grains in general is still extremely bearish, especially with record wheat supplies and the ending stock numbers we’re talking about for beans. It seems like a real gift to get some better corn prices, so we want to take advantage of it.”