Dec 17, 2015

Wyoming farmers see possible good news, opportunities in new Trans-Pacific Partnership

Wyoming and American livestock and crop producers are gearing up for increased trade with Asian countries through the Trans-Pacific Partnership trade agreement.

After seven years of negotiations, the agreement was finalized Oct. 5 to increase trade between 12 Pacific Rim countries: United States, Vietnam, Chile, Brunei, Singapore, New Zealand, Australia, Canada, Japan, Malaysia, Mexico and Peru.

“We will be able to export more and the demand will go up,” said Arley George, treasurer for the Park County Farm Bureau Federation board. “That means the price will improve from a supplier standpoint.”

The implications for Wyoming’s farmers and ranchers were discussed with the American Farm Bureau Federation’s deputy chief economist, John Anderson, during the Wyoming Farm Bureau Federation’s annual meeting in Cody last month.

“It provides a lot of benefits, allows countries to get more of everything — but it does produce some winners and losers,” Anderson said.

The American Farm Bureau Federation has not yet taken an official position on the new trade agreement as it's still analyzing how the deal could impact American farmers, ranchers and citizens.

“In the end, it is going to be good for us, but we haven’t seen the final results,” said Park County Farm Bureau Federation member Scott George.

The U.S. International Trade Commission is reviewing the agreement now, then it will be sent to Congress to make a decision in May. But it is unlikely Congress will vote on it until after the presidential election, Anderson said.

“For years they have been preaching this Asian market,” said Park County Farm Bureau Federation member Keith Scheubel. “With them (Asian citizens) making more money, the first place they spend it is on better food, and that has helped. … If the markets will bear it, we can produce.”

By increasing exports, then American consumers could face higher prices in the store, Scott George said.

“In the end, it is going to be good for us, but we haven’t seen the final results,” said Park County Farm Bureau Federation member Scott George.

The American dollar has been regaining strength recently, which means it’s cheaper to buy imports in the U.S., and American-made products are more valuable overseas, Anderson said.

Wyoming’s top five agricultural exports are:
  • Beef and veal
  • Hides and skins
  • Feeds and fodder
  • Pork
  • Wheat
Agricultural exports account for 2,900 jobs in Wyoming with an annual value of about $389 million.

The countries shown in red are participants in the Trans-Pacific Partnership. Image courtesy of the Office of the U.S. Trade Representative
“There is definitely stuff that is affected here in Park County,” said Park County Farm Bureau Federation board member Corey Forman. “It seemed to be that sugar and dairy are losing a bit right now.”

Beef and veal are big sellers in Japan. Under the new trade agreement that's anticipated to increase, as tariffs are set to drop from 50 percent to 9 percent. Nearly 80 percent of pork’s tariffs in Japan will also be dropped.

“Those are some real wins for the cattle industry,” Scott George said.

The Georges were one of two Wyoming ranching families featured in an international advertising campaign to increase beef demand in Japan earlier this year.

Many of the trade agreement’s changes will happen over the next five years and others are spaced out over 20 years, Anderson said.

Japan already had easy access to American wheat before the trade agreement. The few fees for those imports will come down as well.

“We are in great shape compared to other products, but there will be improvement,” Anderson said.

Mexico, Chile and Australia were already duty-free for American agricultural imports.

American consumers compete indirectly with the export market, Arley George said. He noted that some parts of livestock tend to go to different regions where they are considered delicacies -- such as tongues in Mexico.

“But then Japan wanted involved and it made it an interesting agreement for us,” Anderson said. “A lot of tariff lines got eliminated and all of the tariff lines are slowly coming down. For beef and pork, TPP is pretty attractive. The headlines on the meat side are pretty attractive.”

On the American side for imports, the barriers tend to be lower.

“We really don’t have much to give up and quite a bit to gain,” Anderson said.

Exporting into China is a bit more challenging.

The country's economy has slowed, but they remain a big market for pork, Anderson said. The Chinese economy has dropped from around 10 percent annual growth to around 6 percent annual, but it grew so large over the last decade that a 6 percent increase now is a bigger step than 10 percent was in previous years, Anderson said.

“That is a big issue,” Anderson said. “We want better access to China because they can take a lot of products.”

China does not take American beef, but it can be shipped to Hong Kong.

The Obama administration says the Trans-Pacific Partnership is good for the U.S.; the Farm Bureau has not yet taken a position on the agreement. Image courtesy of the Office of the U.S. Trade Representative
Many commodities are decreasing in price, such as corn, wheat and sugar, Scheubel said.

“That is the thing with farming, it is volatile,” Scheubel said, noting that weather activity is no longer the only factor. “We watch Brazil and Argentina and their ag has exploded, and it affects our markets.”

Sugar beet prices dropped recently, going from about $75 per ton two years ago to about $30 per ton today, Scheubel said.

“The only thing saving this year is, it is almost a record year — just one point higher on sugar content is (equal to) two more tons of beets per acre,” Scheubel said.

Cattle numbers, meanwhile, are light, but beef production is higher than a year ago because there are more pounds on every animal and more market-ready animals to choose from, Anderson said. He said cattle are coming in bigger than before at 930 pounds on average for dressed weight. 

Pork is also 13 percent above where it was a year ago.

With that and the new trade agreement in mind, beef and pork production are anticipated to increase next year, Anderson said.

High cattle prices will eventually come down, but “it has been really nice,” Scheubel said.

He said there's been "huge" amounts of volatility in some parts of the cattle market.

In October, feeder cattle were $1.70 a pound, then rose to $1.95 a pound; that's a $200 difference per head.

“I don’t know who is driving this, but it has been really volatile,” Anderson said.

Current predictions for the next 12 months for fed cattle say to expect fluctuations from as low as $1.20 to as high as $1.35 per pound. Feeder cattle should remain at about $1.60.

“What goes up must come down, it has been really high,” Scheubel said, noting that high cattle prices are why the beef is more expensive at American stores. “It has been really nice.”

Drought conditions have helped drive the increase in beef prices. For instance, bred cattle could be bought for $700 three or four years ago, then it went up to $2,600. Now the price is about $2,200 a head, Scheubel said.

“It is still a decent price, it (just) went up so high,” Scheubel said.


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