Will Japan Continue to Buy U.S. Beef?

Economic Tidbits 12.18.17

The beef sector has been largely unphased by the ongoing U.S. trade disputes with other countries. Fortunately, trade quarrels with the largest U.S. beef customers, South Korea and Japan, have been avoided. According to the U.S. Meat Export Federation (USMEF), through October of last year, the value of overall U.S. beef exports was up 19 percent compared to the previous year. Exports to Japan were up 15 percent and those to South Korea were up 50 percent. Japan was the largest U.S. customer, purchasing nearly $1.5 billion in U.S. beef. For Nebraska, the nation’s largest beef exporter, these exports have helped offset the less than stellar export performance of other agricultural commodities.

steakNebraska beef producers need exports to grow again in 2019 to help offset the expected growth in beef production. However, the launch of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) at the beginning of the year could be a headwind for increased export growth. The CPTPP is comprised of 11 countries, including Canada, Australia, New Zealand, Mexico, and Japan. It was resurrected from the ashes of the Trans-Pacific Partnership (TPP) of which the U.S. was a part until President Trump withdrew in January 2017. Under the CPTPP, Japan will lower tariffs on beef imports from CPTPP members over a 15-year period. Japanese beef purchases from Australia, Canada, New Zealand, and Mexico will have reduced tariff rates and purchases of U.S. beef will continue to face higher tariffs, placing U.S. exports at a competitive disadvantage.

Australian beef is the primary competitor to U.S. beef in Japan. A report by the University of Tennessee showed the shifts in beef suppliers to Japan could be significant under the CPTPP. According to the report, “For chilled beef, lower tariffs appear to benefit Australian beef, at the expense of U.S. beef. The projection range suggests that Australian beef could increase by as much as $139 million, while U.S. beef could decrease by as much as $143 million.” Analysis by the USMEF echoes the University of Tennessee findings, “. . . the U.S. share of Japan’s growing beef imports is expected to decline, from 43 percent to 36 percent by 2023, and to 30 percent by 2028. Due to widening tariff disadvantages and lost opportunities, U.S. beef annual export losses by 2023 are estimated at $550 million, and will exceed $1.2 billion by 2028. On a per-head basis, losses are estimated at $20.40 by 2023 and $43.75 by 2028.”

The Trump Administration is in the process of negotiating a free trade agreement with Japan. The specter of the potential losses in beef exports has many in U.S. agriculture encouraging the Administration to see these negotiations to a successful end sooner rather than later. A trade agreement with CPTTP-like tariff reductions on U.S. beef would level the playing field and help maintain U.S. market share in Japan’s large and growing market. Nebraska, more than any other state, needs to see these negotiations be successful.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Tariff Threats No Longer Just Bluster

Economic Tidbits 12.18.17

Last week marked a new extreme in the trade tensions between the U.S. and China as President Trump moved forward with tariffs on $34 billion of imported Chinese machinery, auto parts, and medical devices.  China responded immediately with tariffs on several U.S. products including soybeans and pork.  Several U.S. trading partners have now imposed tariffs on U.S. commodities and processed foods in response to tariffs imposed by the U.S.  With all the threats and tariffs imposed, it’s difficult to stay abreast of where things now stand.  Table 1 summarizes recent tariffs enacted by other countries on U.S. agricultural products which will affect Nebraska.  Continue reading

What’s Included in the Senate Farm Bill?

Economic Tidbits 12.18.17

The U.S. Senate last week passed its version of the 2018 farm bill in an 86-to-11 vote.  Like the House farm bill, the Senate version is evolutionary in the sense it retains much of current commodity programs but tweaks some of the minutiae.  Continue reading

Sometimes Timing is Everything . . .

Economic Tidbits 12.18.17

Some Nebraska farmers have said they aren’t too concerned with the ongoing trade tensions with China, the largest customer for U.S. soybeans.  If the tensions were bad for the soybean market, they state, soybean prices would have dropped.  Price haven’t dropped, so the Chinese trade tensions are not a problem.  Sometimes, though, timing is everything—could it be the timing of rising Chinese trade tensions coincided with other market happenings which mitigated any price response?
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Nebraska Soybean Yields vs. Corn Yields

Economic Tidbits 12.18.17

Does the exceptionally high soybean yields in recent years mean soybean yields are increasing relative to corn yields?  Gary Schnitkey, an agricultural economist at the University of Illinois, recently examined this question.  Using state yield data from the National Agricultural Statistics Service for 1972 to 2017, Schnitkey examined corn and soybean yield trends across the Corn Belt to see if soybean yield increases are outpacing those in corn.  For Nebraska, Schnitkey found the state average corn yield increased an average of 2.0 bushels per year between 1972 and 2017.  At the same time, the average soybean yield increased by .65 bushels per year.  The soybean yield-to corn yield ratio averaged .30 over the period and did not exhibit any trends. (see Figure 9 below).  The soybean-to-corn yield ratio was .34 in 2016 and .32 in 2017.  Continue reading

Agricultural Land Taxable Values Down . . .

Economic Tidbits 12.18.17

The taxable value on agricultural land declined 2.77 percent in 2018 according to the Nebraska Department of Revenue.  Taxable value for all real property increased 0.96 percent, with residential and recreational property value growing 3.66 percent, and commercial and industrial property growing 6.94 percent. The decline in agricultural land values marks the second consecutive year taxable values have shrunk.  Prior to last year, the taxable value on agricultural land had not declined since at least 1993, and perhaps as far back as the late 1980s.  It may seem like a distant memory, but just three years ago, the taxable value of agricultural land statewide increased almost 20 percent.  Since then, market values for land have declined between 15-20 percent and these declines are now being reflected in taxable values.  Expect taxable values to continue to decline over the next few years due to the lag effect in how taxable values are set.  Values are set using data on sales prices from the three years prior to the tax year for which the taxable values are being set.

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Trade Tensions Rise . . .

Economic Tidbits 12.18.17

Last week China issued a list of 106 U.S. products and goods, 37 of which are agricultural, that will face additional tariffs in retaliation to the April 3 announcement by the Trump Administration that the U.S. intends to enact tariffs on $50 billion of imports from China.  The latest Chinese list includes soybeans, corn, and beef, the top three exports commodities from Nebraska, and are in addition to a list announced earlier which included added tariffs on pork and ethanol.  Last Friday, it was revealed President Trump has instructed administration officials to investigate whether tariffs on another $100 billion of Chinese goods is warranted.  Thus, it appears the U.S. and China are rapidly escalating to a full-fledged trade war.   Continue reading