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Trade is essential

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Jan 27, 2017

Trump is doing just what he said he would do. Last week, he took the U.S. out of the Trans-Pacific Partnership (TPP). I don’t know the exact details of the deal with 12 Pacific Rim countries, but I do know that the beef industry was at the table protecting our interests.

Trade is one aspect of the Trump administration that hasn’t been very clear. They seem to prefer bilateral trade agreements vs. the multilateral kind. I suppose that making agreements with one country vs. 12 would be much easier to enforce, and I’m sure that we can take a lot of the social and political baggage out of an agreement with one country.

The multilateral agreements seem to be more efficient when you’re trying to gain the confidence of the world and create peace, however.

Trading partnerships are one of the best tools in keeping the world at peace. When everyone has a mutual economic interest it creates respect, and most of us don’t want to anger someone you’re doing business with. That’s bad business and peace and prosperity is a great thing.

Trump also wants to reopen the North American Free Trade Agreement (NAFTA). I’m not sure what he wants to tweak in the 20-year-old trade pact. Goods and services trade freely without tariffs between the U.S., Canada and Mexico. NAFTA has generally been good for agriculture and the beef industry. Now Mexico sends beef up here.

Tracy Bruner, President of National Cattlemen’s Beef Association, said in a press release that “since NAFTA was introduced, exports of American-produced beef to Mexico have grown by more than 750 percent. We’re especially concerned that the administration is taking these actions without any meaningful alternatives in place that would compensate for the tremendous loss that cattle producers will face without TPP or NAFTA.” Sounds like we’re asking for a subsidy if they do ruin our export market.

Export trade is the key to keeping the beef industry profitable going forward. In 2016 there was 6.3 percent more beef production, and we saw what happened to live cattle prices. During 2017, market analysts are expecting to see nearly a million more cattle go through the beef production chain. With that additional inventory, we will certainly need somewhere else to go with all that beef, especially when you add in the spike in pork and poultry production.

We need to protect the market. Trump will have to tread carefully to keep the cattle and beef markets healthy. One thing for sure is that the U.S. can’t afford to be caught flat-footed while the rest of the world is busy creating new markets for products. It’s been several years since the U.S. has opened any new markets for export trade. So far Trump appears to be aggressive in his agenda and has done quite a bit in his first week. But it’s time to get moving so we don’t see $80/cwt. fed cattle in the future.

I’m somewhat amused when Trump says he wants to bring back jobs in the heartland. The truth, we all know, is that it’s hard to find help running these ranches and processing plants to keep the beef industries moving forward. There has to be a reasonable return on the ranching and processing resources to keep people interested in ranching and marketing beef. Packing plants have a terrible time finding employees to slaughter and break beef carcasses; it’s tough work and most folks have no interest in doing it. That’s the way it is with most farm labor too. We have to import those folks who will do the work. That’s reality so I don’t think Trump is going to go on a deportation binge.

These next several years are going to be sensitive in terms of trade deals. The world is moving fast. India is a big player in beef—specifically, water buffalo—trade, but they have gained direct access to China as have Australia and Brazil. The U.S. is the only major beef producing country that doesn’t have direct access to China, which is the big prize. — PETE CROW

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