“Asia” and “NAFTA”—the North American Free Trade Agreement—were the watchwords with the U.S. Meat Export Federation (USMEF) last week.
Last Tuesday saw USMEF kick off its annual Strategic Planning Conference in Tucson, AZ. It started with an ag media press call where leadership talked about the successes of 2017 and previewed trade goals going forward.
“When we take a look at 2017, we are very pleased with the results that we’ve been able to achieve this year,” commented USMEF CEO Phil Seng. According to USDA trade data from January through August (most recent complete data), exports of beef and veal in 2017 are up 14.5 percent by volume compared to the same time in 2016.
“With these double-digit increases from year-to-year, it’s very clear that the international marketplace and the international component to the industry is pulling its weight. Our exports are growing at least double to almost three times faster than our production, so this continues to be a very profitable center for the entire industry.”
NAFTA
The two central topics discussed in the call-in was the ongoing NAFTA renegotiations, and the changes in Asian beef markets. NAFTA had a way of weaving into every topic of discussion, however.
Seng called the agreement and the ongoing renegotiation process an “imminent concern” for USMEF. The fifth round of NAFTA talks are scheduled for Nov. 17-21 in Mexico City.
“I don’t think anyone would disagree with me that [NAFTA’s] been actually a beautiful arrangement for the U.S. red meat industry,” Seng commented. He reminded his audience of a “little episode” back in 2003. He pointed out that Canada and then Mexico reopened their borders to U.S. beef within a few months of the first discovery of BSE in the U.S. after over 70 countries blocked trade.
“If you recall, we were just celebrating a few months ago when China opened its doors. But those two countries—the countries that are our neighbors and closest friends—they opened up within three months’ time and this was very central to the viability of the U.S. beef industry and to some degree the survivability of the U.S. beef industry at the time.”
He added, in no uncertain terms that, “Leaving NAFTA would be a mistake, and I think even threatening to leave NAFTA is basically a mistake.”
Oscar Ferrara, USMEF regional director of Mexico, echoed this sentiment with another familiar term; “uncertainty.”
“We have a situation right now in which the negotiations are creating a lot of uncertainty in the market. We have seen the Mexican delegation going into different countries looking for other markets,” he said, specifically identifying Brazil, Argentina, and Chile as delegation destinations.
However, he also noted that consumption of beef and especially pork among Mexicans has grown despite “the noise about NAFTA.”
“What we are seeing in Mexico is that there is a tremendous appetite for U.S. red meat.”
The potential of retaliations, particularly from Mexico, came up during the question and answer section. Seng noted that industries that have been successful—as the red meat industry has been, he said—are often targeted first for unrelated retaliations.
“But again, we don’t know what might happen in the next set of negotiations going forward either.”
When asked if the Trump administration is approaching the NAFTA renegotiations in good faith, Seng said yes. He did have some indirect words of warning on the relevance of the renegotiations, however.
“If you’re going to try to rectify the trade deficit, you’re never going to get that resolved in dealing with Mexico and Canada,” he said.
“If you look at the numbers, 77 percent of the U.S. trade deficit is with three countries; China’s the big one, Japan, and the EU. … Those are the three major locomotives of the trade deficit and until we address those countries in a very good-faith effort on trade, we’re not going to resolve the trade deficit.”
The Bureau of Economic Analysis’ 2016 annual report (most recent complete data) listed China ($347 billion), the EU ($146.3 billion), and Japan ($68.9 billion) as the top contributors to the trade deficit in 2016. Mexico and Canada by comparison were responsible for $63.2 and $11.2 billion respectively.
Asia
Significant attention was on not only the increase in trade in key Asian markets, but on the increasing demand many markets are boasting.
“I know this year has been the year of China opening up, but I think it’s amazing that in countries like Japan and Korea, we’re still finding markets within markets,” said Joel Haggard, USMEF senior vice president, Asia Pacific.
Seng jumped in, pointing out Japan’s beef consumption has increased 4 percent this year. A recent USDA Foreign Agricultural Service report noted that beef demand in China grew 20 percent between 2011 and 2016. It additionally said beef demand in East Asia will “remain robust” in its forecast.
“The more demand you can create globally for these products, the more we can force the cutout higher which eventually translates into better prognosis for the live price,” Dan Halstrom, USMEF president, added. — Kerry Halladay, WLJ editor
