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

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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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

Trade Deficits: Good or Bad?

Economic Tidbits 12.18.17

The U.S. trade deficit with the rest of the world has been getting a lot of attention lately.  In January, the deficit was estimated to be $56.6 billion, the highest level in nearly a decade.  President Trump believes the trade deficit is bad and argues the U.S. is losing to other countries with which it trades.  Accordingly, he believes the U.S. must renegotiate trade agreements and enact tariffs on imported goods to rectify the large deficits.  The President’s arguments raise two questions:  Are trade deficits inherently bad? And, is the U.S. losing to the rest of the world by having such large trade deficits?  Continue reading

What’s Ahead for 2018 . . .

Economic Tidbits 12.18.17

The USDA expects prices for corn, cattle, and soybeans to be off a bit in 2018.  Prices for wheat and hogs are expected to be higher.  Given the large production levels of all these commodities in recent years, prices, while soft, have been stable due to relatively strong demand, boosted in part by robust export markets.  The strong demand needs to continue, and, thus far, signs point to demand remaining strong.  For example, Jim Robb, director of the Livestock Market Information Center, recently said the average American is expected to eat 219 pounds of red meat and poultry this year, the highest level since 2007.

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Nebraska County Export Values . . .

 

Economic Tidbits logoInternational trade and foreign markets are critical to Nebraska agriculture.  To get a sense of which Nebraska counties are most reliant on international trade, the Nebraska Department of Agriculture has created a map showing export values by county for select commodities (see below).  Commodities included are beef and beef products, corn, dairy products, distillers grains, ethanol, pork and pork products, pulses, sorghum, soybeans and soybean products and wheat.  The map was created using 2015 Nebraska cash receipts data and attributing shares to counties based on county production data.  Platte County topped the state with export values of $245 million.  Custer, Holt, Boone and Cuming Counties fall in the next tier with export values between $125-$150 million.  Most counties in Nebraska generate at least $25 million in export values, which no doubt contributes significantly to their local economies.

The top counties stand to gain the most from increased access to foreign markets.  Free trade agreements with Mexico, Canada, Korea, Colombia and others, while benefitting all counties, have been particularly beneficial to these counties.  An analysis last year of the benefits of the TransPacific Partnership (TPP) by Nebraska Farm Bureau showed many of these same counties would have benefited from the $378 million in increased receipts Nebraska was projected to receive under the agreement.  The map clearly demonstrates it is in the interest of Nebraska agriculture to continue to press for more open international markets in agricultural products.
county exports

 

Jay 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 firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Trade, TPA Vital to Agriculture Prosperity

Steve Nelson1It’s hard to open an agriculture publication these days without reading something related to agriculture trade; and for good reason. Strong agriculture exports (along with the boom in ethanol production) have been the key drivers of agriculture prosperity over of the last decade. Continued prosperity in agriculture over the next 10 years will have much to do with how well we’re able to tap into a growing world market that we know will have more mouths to feed.

While some skeptics still question the value of trade to agriculture, it’s impossible to escape the numbers.

For perspective, total U.S. agriculture exports increased 30 percent over the last five years. Here in Nebraska, we shared in that trend. From 2009-2013 the value of Nebraska exports increased 36 percent, led by a 116 percent increase in beef exports, and major increases in exports of both soybeans (29 percent) and soybean meal (53 percent).

Most of the recent export gains have been strongest in the NAFTA countries and non-Japan Asia markets. China is a now a major player in world agriculture trade. From 2004 to 2014 U.S. exports to China increased 330 percent. During that time U.S. agriculture exports to NAFTA partners Canada and Mexico were also up 121 and 130 percent, respectively. These trade opportunities have not only helped boost farm prices and income, but also helped support about 50,000 Nebraska jobs both on the farm and in related industries such as food processing, transportation and manufacturing.

The importance of agriculture trade to farm income is expected to continue into the next decade as global demand for overall agricultural products is expected to grow in the years ahead. USDA projects total U.S. agriculture exports will increase another 23 percent between 2014 and 2024. One of the largest projected growth areas for U.S. agriculture exports during that period lies in markets Nebraska is well positioned to fulfill, namely demand for livestock, poultry and dairy products.

While numerous factors will influence Nebraska’s agriculture export potential over the next decade, the U.S. ability to tap into and be a part of future trade agreements is one of the largest. That’s why Farm Bureau has been such a strong proponent of Congress granting the President Trade Promotion Authority (TPA). Regardless of how this Administration has handled other issues related to agriculture, there is little to debate when it comes to trade. It’s vital to the future of agriculture prosperity. TPA has been given to every U.S. President since 1974 and without it, the Administration is lacking what it needs to show potential trading partners that Congress is serious about moving ahead in trade negotiations.

Right now the U.S. is negotiating new trade agreements with some of the world’s largest and fastest-growing economies, including Europe and 11 Asia-Pacific nations, through the Trans-Atlantic Trade and Investment Partnership (T-TIP) and the Trans Pacific Partnership (TPP). It’s critical Congress grant TPA authority to shore up the U.S. position in these and other trade talks. Trade deals are going to be made, and will be made. Without TPA, the U.S. and Nebraska farmers and ranchers could be the ones left on the outside, looking in.

Until next month,

Steve Nelson, President, Nebraska Farm Bureau Federation