TPP and the potential impact it could have on agriculture

October 06, 2016

Red Barn in the Morning

The controversial Trans Pacific Partnership (TPP) is one of the many issues caught up in this year’s presidential election. A recent article discusses the partnership as it specifically relates to agriculture and although views differ on the campaign trail, one thing is for sure, trade is a main lifeline for many agricultural goods.

“About 20% of the volume of all products grown in the U.S are exported; about 30% by value,” Veronica Nigh, Economist for American Farm Bureau Federation, said in the article.

As more products are shipped, American Farm Bureau says it’s having a direct impact on the U.S. economy, with USDA’s calculations pointing to 7,500 jobs created for every $1 billion in trade. While trade may be a buzzword for some, for corn growers, it’s something they see as essential and would like to see grow.

“If you look at the world, there are hundreds of trade agreements, and the U.S. is in about 20, and so we have very few trade agreements,” said Wesley Spurlock, Vice President of National Corn Growers Association (NCGA) and farmer.

So, what exactly is TPP? According to the article, TPP is the pending trade deal involving 12 countries lining the Pacific Rim, including the U.S. While the U.S. already trades with some of those included in TPP, Nigh says the agreement would help reduce hefty tariffs currently in place.

Farm groups are hopeful Congress will take up the issue in the lame-duck session, trying to beat the calendar before a new president is elected. However, both chambers have nearly written off that idea, saying it won’t happen in 2016. But, that’s not stopping some in the agriculture industry from pushing the major trade deal.

“It would be huge for the U.S. pork industry. We’ve estimated that it’ll add $4.4 billion to net farm income in the United States each year,” Nigh added. “Probably the biggest fish among those 11 is Japan, which is already our fourth largest export market, but there’s a lot of room to grow. Japan has a lot of high tariffs on a number of products that the U.S. specializes in.”

On that list is beef. Nigh said in the article that the U.S. currently faces a 39% tax on beef exports to Japan. Through TPP, that would drop to 9%. Meanwhile, as wheat prices hit 10-year lows, wheat growers say TPP could help give prices some life, opening up the door to key markets.

“It would allow us to gain better access into Korea with some tariffs that are in place now that are really stopping our ability to be a competitive exporter into that market,” said David Schemm, National Association of Wheat Growers (NAWG) Vice President and Kansas Wheat Grower.

But it’s more than just trade with the 11 other TPP countries that are attractive to agriculture. The article explains that rice groups also want access to more consumers hungry for U.S. rice.

“We need more demand,” said Johnny Sullivan of Producers Rice Mill in Stuttgart, Arkansas. “We have ample quality supply, and we don’t have the demand we need. That’s hurting us.”

Today, Mexico and Central America are the top buyers of U.S. rice. Sullivan says countries like Cuba hold potential, and could virtually change the demand picture over night, but if China would start buying, that would be a game changer.

“China is a monster of a market,” Sullivan said in the article. “The facts are based on consumption rates of rice in China, the short version is in 14 day period, they could eat the entire U.S. crop.”

It’s more than just rice that is looking to China to pick up demand. Pork producers say China’s shortage of pork products isn’t inhibiting them from keeping up with demand, which creates an opportunity for U.S. pork. For soybean growers, China is a top buyer, but balancing that demand is a concern moving forward.

“25% have to continue to be active in other markets globally to make sure that if that happens, we can still move our soybeans into the marketplace,” said Ron Moore, vice president of American Soybean Association (ASA) and Iowa soybean farmer.

No matter the destination, many agriculture groups say the U.S. must grow demand to help farmers’ bottom lines.

“Our domestic consumption is strong but virtually flat,” said Becca Nepple, vice president of International Marketing for the National Pork Board (NPB). “Even if our consumers were to consume two more pounds of pork product a year, which would not compensate for the amount of pork we will have on the market.”

Not everyone in agriculture is a fan of trade or these major trade deals, however, as it’s seen as a double-edged sword for certain commodities, including sugar beets.

“We’re not exporting any sugar,” said Duane Maatz, executive director of Red River Sugar beet Growers Association. “So for us, we would just assume temper all of these agreements, and if you want to trade something with someone else, that’s fine, but you could leave us out and we’d be happy with that.”

Sugar beet growers say they aren’t against current trade deals, knowing many areas of agriculture benefit. However, when other countries subsidize production, undercutting the U.S. price, that’s when groups like sugar and rice say some deals are unjust.

“We want to create a level playing field and anytime another country is allowed to subsidize and export, we know that’s not fair to our growers,” Maatz said.

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Category: Agriculture