Daily Ag News Summary 11/13/2017

NAFTA 2.0 and U.S. Agriculture in Trouble?

A marriage of 23 years appears to be in trouble. Negotiators from Canada, Mexico, and the United States are set to gather this week in Mexico City for counseling to work out differences related to trade. The North American Free Trade Agreement (NAFTA) enters the fifth round of work on the trade deal that U.S. President Donald Trump has called the “worst trade deal ever”. News reports say that the three sides are far from reaching an agreement. The automotive industry has been the main focus of the U.S. as well as getting the other two partners to agree to concessions made in a different agreement, the Trans-Pacific Partnership (TPP) that Trump walked away from.

“Everything’s on the table so now the real negotiating begins and so this is a time for all of us,” says U.S. Grains Council (USGC) President and CEO Tom Sleight. “Every farmer should pay very close attention to what goes on in Mexico City.” For U.S. farmers and ranchers there is much on the line. Informa Economics says that domestic feed grain and grain products exports were worth $18.9 billion in 2015 and supported $55.5 billion in economic output. The exports were linked to nearly 262,000 American jobs. “I think the administration understands the agricultural issues very well and is working on them. It’s just that there are a lot of other issues that sort of overlay on agriculture.” Overall trade between the three has increased from $293 billion in 1993 to $1.1 trillion in 2016.

What is most concerning at this point is the uncertainty. Corn, ethanol and dried distillers grains (DDGS) exports to Mexico are booming this marketing year according to the U.S. Department of Agriculture (USDA), but may be in jeopardy. Sleight explains: “we had a meeting in Mexico (last week) with a lot of buyers and there is a general feeling that the U.S. is no longer seen as a reliable source of supply and that really sends alarms for us that we’ve so soured this relationship that we’re now seen as an unreliable supply.”

Mexico’s primary sticking point involves labor regulations and the differences in pay for Mexican workers compared to the U.S. and Canada. Other issues include immigration and a proposed border wall (by Trump) between the two countries. For Canada, they want assurances that no country can weaken its environmental standards to attract investment, seek language on gender rights, freer movement of professionals and expanded procurement rules, and the elimination of “Buy American” rules for construction jobs. “We’ve got to get this right and agriculture needs to stay vigilant at the negotiations” Sleight said.

Pesticide Residues Top WTO Food Safety Agenda

A range of trade concerns on pesticides in food products was discussed recently at the World Trade Organizations (WTO) Committee on Sanitary and Phytosanitary Measures (SPS) but members were unable to bridge gaps on a proposed decision on residues to be considered during the upcoming 11th Ministerial Conference (MC11). Members were unable to reach consensus to endorse a decision on pesticide maximum residue levels (MRLs). An MRL is the maximum amount of pesticide residue permitted to remain in or on food products to ensure no risk to human health. The proposal from Kenya, Uganda, and the United States noted that agricultural producers report growing concerns over the impact of missing and misaligned MRLs on their exports.

Proponents highlighted that missing MRLs, as well as differences between MRLs applied in different countries, can impede international trade in agricultural products, and urged members to share information and experiences on the development of MRLs on a voluntary basis. They also suggested strengthening the process for developing international standards, to promote harmonization. They stressed that bringing this matter to the highest decision-making body of the WTO would help raise the profile of MRL-related issues, injecting momentum to address the problem.

In conclusion, the Committee Chair urged members to continue working on solutions that would meet all members needs.

Beef Exports Explode While Pork Remains Steady

September pork export volume was steady with both the August and year-ago levels, while beef exports edged higher in volume and jumped substantially in value, according to statistics released by the U.S Department of Agriculture (USDA). Pork exports totaled more than 183,000 metric tons (mt) in September, nearly identical to both the September 2016 and August 2017 volumes while export values were just under $504 million, a 3 percent increase. Through the first three quarters of the year, pork exports were 8 percent ahead of last year’s record pace at 1.79 million mt and export values climbed 10 percent to $4.71 billion.

September exports accounted for 23.6 percent of total pork production and 19.8 percent for muscle cuts only, both down slightly from a year ago. For January through September, these ratios improved about one percentage point from a year ago to 26.5 percent of total production and 22.1 percent for muscle cuts. September export value averaged $48.98 per head slaughtered, up 1 percent from a year ago. Through the first three quarters of the year, the per-head export value was $52.79, up 7 percent.

Cattle Feeding Returns Improving

Cattle feeding profitability has been on a roller coaster ride the last couple of years says Dr. Jim Mintert, Agricultural Economist at Purdue University. Estimated cattle feeding returns calculated each month by Iowa State Extension provide insight into the situation Corn Belt feeders face. According to the data, which assumes that cattle are placed on feed each month with inputs purchased and fed cattle sold in the cash market without any risk management, cattle feeders suffered horrific losses in both 2015 and 2016. Losses continued throughout 2016 and still averaged a loss of $117 per head for a typical yearling feeding program, and a loss of $216 per head for a typical calf feeding program, during 2016’s October-December quarter.

The situation changed dramatically in 2017. Mintert explains that during the first nine months of 2017, feeding returns for yearlings averaged more than $198 per head and over $191 for calves. The turnaround was even more dramatic when the monthly returns are examined as monthly yearling returns actually exceeded $415 and calf feeding returns climbed over $500 per head during May 2017. The return for feeding calves during May was a new record in the Iowa State data going back to 1981 and the yearling feeding return was the highest value since 2003. The increase in feeding returns in spring 2017 was the result of cattle feeders’ break-evens declining from $117 per cwt. at the beginning of the year to the upper $90’s per cwt., for calf programs, and the low $100’s per cwt., for yearling programs, by spring, combined with a strengthening fed cattle market. Sale prices for fed cattle climbed roughly $20 per hundredweight from the beginning of the year to mid-spring, pushing the revenue per head up by approximately $250 per head.

For more information: http://farmdocdaily.illinois.edu/2017/11/cattle-feeding-returns-improving.html