FarmPolicy

March 23, 2019

Trade Update: Cuba, Trans-Pacific Partnership

Categories: Trade

Cuba Trade Issues

Recall that last week, Sen. Amy Klobuchar (D., Minn.) “led a bipartisan coalition of lawmakers to introduce major legislation to lift the Cuba trade embargo.”

Colby Itkowitz indicated on Tuesday at the In the Loop Blog (Washington Post) that Sen. Klobuchar was wrapping up a four day trip to Cuba with Senators Claire McCaskill (D., Mo.) and Mark Warner (D.,Va.).

Ms. Itkowitz pointed out that, “More Democrats are excited about the prospects of opening up Cuba than Republicans, but Klobuchar said she’s hearing positive things from GOP lawmakers, especially those representing big farm states. The agriculture and business communities are eager to tap into a newly expanded market, which could help sway reluctant Republicans. (Currently U.S. agricultural exports are allowed to Cuba, but only on a cash-basis.)”

Brett Neely reported on Tuesday at the Capitol View Blog (Minnesota Public Radio) that, “Another member of the Minnesota delegation who is on the island is U.S. Rep. Collin Peterson, who represents the 7th District. He is part of a delegation of Democrats led by Minority Leader Nancy Pelosi that also is focusing on trade and agriculture. Peterson has been pushing for years to ease travel restrictions on U.S. citizens to Cuba.

“Although agricultural trade between Minnesota and Cuba clocked in at a modest $20 million in 2013 (limited trade has been allowed despite the embargo), the state’s business community views the island as a potentially lucrative market. Agribusiness giant Cargill has helped organize a coalition of companies to press for an end to the embargo.”

Trans-Pacific Partnership (TPP)

A news release on Tuesday from the House Ways and Means Committee indicated that, “On Monday, a congressional delegation led by Ways and Means Chairman Paul Ryan (R-WI) held meetings in Singapore, the first of three Asian nations the group will visit on the week-long trip.

“Singapore is one of the United States’s strongest partners in the region, and the two nations maintain an important economic and national-security relationship. The country is also playing a critical role in bringing the ongoing Trans-Pacific Partnership (TPP) negotiations to a successful conclusion…The members reaffirmed the United States’s goal to achieve a high-standard TPP agreement in the near term, and they encouraged the government of Singapore to use its leadership position in the region to help meet that goal. The delegation impressed upon the officials the importance of issues like strong intellectual-property protections, increased access for American agriculture and disciplining state-owned enterprises.”

Jacqui Fatka reported on Tuesday at Farm Futures Online that, “Last year’s Trans-Pacific Partnership negotiations were marked by Japan’s unwillingness to lower tariffs and restrictions on key agricultural and auto markets, but the tide could be changing.

Darci Vetter, chief agricultural negotiator for the Office of the U.S. Trade Representative, says that negotiations are ‘entering the end game‘ although the timeline will be decided when tough issues can be resolved.”

Ms. Fatka added that, “Vetter said TPA is ‘critical to getting a trade deal across the finish line.’ It allows negotiating partners to understand that whatever deal is agreed upon will be the one put into final action.”

And U.S. Trade Representative Michael Froman penned an argument at Foreign Policy magazine on Tuesday titled, “The Geopolitical Stakes of America’s Trade Policy.”

More broadly on trade, the USDA Press Team tweeted the following update on Tuesday:

Keith Good

FarmPolicy.com Recap (Tuesday)- Trade; Ag Economy; Regulations; and, Immigration

Trade Issues

Labor related disputes at some West Coast ports continue to hamper container product movement, with one consequence being negative implications for the agricultural sector. The port issue was front-page news in Sunday’s Los Angeles Times as well as Tuesday’s Wall Street Journal.

Mickey Kantor, a former U.S. trade representative and secretary of Commerce, noted in Tuesday’s Los Angeles Times that, “If the West Coast’s 29 ports are not returned to full operation soon, it will create a shock wave that reverberates across the economy, derailing a promising economic recovery that is creating jobs and restoring a sense of economic security for the nation…[F]or American farmers, the cost of a shutdown is equally crippling, as orders for many agricultural products are already taking a hit because of the uncertainty over whether they can be delivered in time.

“The Washington, D.C.-based Agriculture Transportation Coalition, which tracks ocean shipping issues, estimated in December that nationwide the lost sales for fruits, vegetables and meats totaled more than $400 million per week. In California, citrus growers are being hit especially hard. Their trade association reckons reductions in sales to Asian markets are already down 25%, costing growers an estimated $125 million.”

Amb. Kantor added that, “President Obama has directed Labor Secretary Thomas Perez to engage in the dispute to revive negotiations, which is a welcome sign. He is scheduled to meet Tuesday with the employer group, the Pacific Maritime Assn., and with the International Longshore and Warehouse Union. But the president must be prepared to use his bully pulpit — and all other means at his disposal — to ensure that our nation remains open for business.”

An update on Tuesday at The Japan News Online indicated that, “Prime Minister Shinzo Abe expressed on Tuesday his desire for an early conclusion of the Trans-Pacific Partnership free trade agreement.

“‘[The negotiations] are in their final phase. I’ll seek the road that best serves the nation’s interests by protecting what needs to be protected and pushing for what we want,’ Abe said about the TPP negotiations during a question-and-answer session at the plenary session of the House of Councillors.”

Adam Behsudi reported at the Tuesday Politico Morning Trade newsletter that, “The Senate is likely to be the first chamber to consider key legislation for getting the landmark Trans-Pacific Partnership agreement and other trade deals easily passed in Congress, House Ways and Means Chairman Paul Ryan said Friday. ‘Our calendar is pretty crowded, and they, I believe, have reserved calendar space to do that, so I literally think it’s a legislative calendar issue,’ the Wisconsin Republican said in a briefing with reporters.

The introduction of a ‘trade promotion authority’ bill could come as soon as next week following the Presidents Day recess. But if the Senate passes the legislation first, a new procedural step would have to be added to the process.”

For a more detailed look at the political play regarding TPA, TPP and currency related issues among lawmakers, and between the executive and legislative branch, see “Currency Battle Is Tethered to Obama Trade Agenda,” by Jonathan Weisman, which was published on the front page of the Business Section in Monday’s New York Times.

 

Agricultural Economy

Recent reports of a growing U.S. hog herd have been noted, while simultaneously, anecdotally related articles regarding citizen concerns  and litigation over the potential negative environmental impacts of some large scale animal operations have also been published in recent days.

With respect to market information, in mid-December, the University of Illinois held an agricultural outlook meeting that included a detailed Agricultural Commodity Price Outlook by Darrel Good, as well as a presentation by Scott Irwin titled, “Can One Monster Crop End the New Era of Grain Prices?

Darrel Good also took a closer look at soybean market variables in a brief report on Monday.

 

Regulations

Meanwhile, new FAA rules regarding drone use were noted on the front page of Tuesday’s Des Moines Register, it appears that at least for now, one primary use of drones in the ag sector is for detailed and efficient crop scouting.

Jack Nicas and Andy Pasztor reported on the front page of the new “Business and Tech” section of Tuesday’s The Wall Street Journal that, “Long-awaited federal rules proposed for commercial drones should pave the way for thousands of U.S. businesses to fly the devices in industries like filmmaking, farming and construction, but drone proponents worried that limits in the regulations would stifle other possible uses like package delivery.”

The Journal writers added that, “Ted Ellett, a former FAA chief counsel who represents companies that want to use drones, said the proposal ‘seems to be close to a home run’ for many of his clients and their peers.

Drones for farming would likely thrive under the proposal, he said, but the FAA’s proposed limits still would allow the agency to block drone flights if they pass ‘over a single farmer on his tractor in the middle of a 100-acre field in Iowa.’”

And, Katy Burne reported in Tuesday’s Wall Street Journal that, “U.S. regulators are poised to introduce measures that would ensure anonymity for traders in the $700 trillion market for swaps, said people familiar with the discussions, a flip-flop that would hand a victory to hedge funds and speedy trading firms while dealing a blow to banks.

“The planned action from the Commodity Futures Trading Commission would encourage trading among any and all market participants, mirroring futures markets that the agency also oversees, and would raise the chance of traders dealing directly with one another, potentially bypassing banks that have historically been major providers for these complex transactions, the people said.

“The CFTC measures could be unveiled as soon as next month and may come as a rule change or as staff guidance, the people familiar said. The Wall Street Journal reported in November that the CFTC was scrutinizing identity disclosures in swaps. A spokesman for the agency declined to comment.”

 

Immigration

Fred Barbash reported on Tuesday at The Washington Post Online that, “A federal judge in Texas last night temporarily blocked the Obama administration’s executive actions on immigration. The judge, responding to a suit filed by 26 Republican-run states, did not rule on the legality of immigration orders but said there was sufficient merit to the challenge to warrant a suspension while the case goes forward.”

Issues regarding immigration and the budget for the Department of Homeland Security also continue to percolate.

Keith Good

Video: U of Il Ag Economist Darrel Good – “Agricultural Commodity Price Outlook for 2015”

Video Presentation: University of Illinois Professor Darrel Good – “Agricultural Commodity Price Outlook for 2015” from the 2014 Illinois Farm Economics Summit.

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The Des Moines Register- New Drone Rules, Farms

Matthew Patane reported on the front page of today’s Des Moines Register that, “Newly proposed commercial rules for the use of unmanned aircraft open doors for Iowa farmers, Realtors and businesses to be more productive, experts said Monday.”

The article stated that, “The business sector has been clamoring for more than year for the Federal Aviation Administration to set rules for using drones, which are now illegal to use for commercial ventures. Several other countries, including Canada, the United Kingdom and Denmark, already are using drones commercially.

“The proposed rules the FAA released Sunday would limit drones to less than 55 pounds. They also would require drone operators to fly only during the day, maintain sight of their aircraft at all times and keep them under an altitude of 500 feet.”

With respect to farm use, Mr. Patane explained that, “Chris Draper, the director of Simpson College’s entrepreneur accelerator program, said the rules would help farmers and businesses get better images. But he doubts they would do much else to help farmers.

“‘What you’re able to do is get great new angles without hiring a helicopter,’ said Draper, who previously worked for the FAA. ‘It will not enable crop dusting or chemical application of fields.’

“That imaging is important, however. The agriculture sector is looking to drones as a way to more effectively scout farmland.” 190px; height: 310px

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Video: U of Il Ag Economist Scott Irwin- “Can One Monster Crop End the New Era of Grain Prices?”

Video Presentation: University of Illinois Professor Scott Irwin – “Can One Monster Crop End the New Era of Grain Prices?” from the 2014 Illinois Farm Economics Summit.

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Tuesday Morning Highlights: Trade- Transportation Issues, Immigration, Ag Economy and Livestock Production

Trade- Transportation Issues

Laura Stevens, Suzanne Kapner and Leslie Josephs reported on the front page of Tuesday’s Wall Street Journal that, “As employers at the ports along the West Coast on Monday refused to unload ships for the sixth day out of the past 10, their nine-month contract dispute with port workers is becoming a significant business problem.

“Ocean carrier Maersk Line has canceled some sailings, while China Ocean Shipping (Group) Co. said it will skip at least one port. Truckers that normally haul an average of five containers a day away from the Port of Oakland, Calif., are lucky to haul one. A West Coast customs broker said that her customers are being assessed as much as $300 a day for containers that sit too long on the docks, though the containers are trapped there.”

The Journal writers noted that, “On Saturday, the White House said it would send the secretary of labor to take part in negotiations and urge both sides to come to an agreement. A federal mediator already had been engaged for the talks.

The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week, including hides and skins.”

Rita Trichur reported in today’s Wall Street Journal that, “The Canadian government is signaling that it could introduce back-to-work legislation as early as Monday to end a strike by unionized workers at Canadian Pacific Railway Ltd. that is snarling freight service across Canada.

“Canada’s Minister of Labour, Kellie Leitch, issued a strongly worded statement Sunday that blamed the union representing CP’s locomotive engineers and conductors for the breakdown in contract talks over the weekend, calling on its officials to abandon their strike and recommence negotiations with the company.

“Thousands of Canadian Pacific’s unionized workers walked off the job early Sunday in a legal strike after negotiations failed to produce a deal. Ms. Leitch, who personally intervened in the dispute, stressed the government would move swiftly to end the job action—a tack that it has increasingly taken to halt other labor disputes.”

The Journal article added that, “With no agreement reached, Canadian Pacific said it would implement a contingency plan to keep at least some freight service moving on its Canadian network with the help of managers.”

Immigration

Meanwhile, Fred Barbash reported on Tuesday at The Washington Post Online that, “A federal judge in Texas last night temporarily blocked the Obama administration’s executive actions on immigration. The judge, responding to a suit filed by 26 Republican-run states, did not rule on the legality of immigration orders but said there was sufficient merit to the challenge to warrant a suspension while the case goes forward.

“The Obama orders would offer a legal reprieve to the undocumented parents of U.S. citizens and permanent residents who have resided in the country for at least five years. This would remove the constant threat of deportation. Many could also receive work permits.”

The Post article indicated that, “The order was issued by Judge Andrew S. Hanen in Brownsville, Tex. Hanen was appointed to the bench by George W. Bush and has been outspoken against the administration’s immigration polices in other cases recently.

“The White House in a statement early Tuesday reported by the AP defended the executive orders issued in November as within the president’s legal authority, saying that the U.S. Supreme Court and Congress have said federal officials can set priorities in enforcing immigration laws.”

Agricultural Economy

University of Illinois agricultural economist Darrel Good noted yesterday at the farmdoc daily blog (“U.S. Soybean Production Prospects for 2015”) that, “Stocks of U.S. soybeans at the end of the current marketing year are expected to be at an eight year high. In addition, the current South American soybean harvest is estimated at a record 6.066 billion bushels, 378 million bushels larger than the 2014 harvest and 710 million bushels larger than the 2013 harvest. The USDA projects September 1, 2015 stocks of soybeans in South America at 2.205 billion bushels, 523 million bushels more than the inventory of the previous year.”

After additional analysis, Monday’s update stated that, “Compared with the current marketing year, expectations for the 2015-16 soybean marketing year include increased acreage, a further increase in year-ending stocks, and lower prices. The expected price decline is moderated by the likelihood that stocks at the end of the current marketing year will be about 90 million bushels less than projected last fall. That is equivalent to two million acres. Prices are not expected to be as low as the CBO baseline projection of $8.19 or even the USDA baseline projection of $8.50. The futures market currently points to a marketing year average near $9.50.”

Livestock Production

AP writer David Pitt reported yesterday that, “Modern meat production, in which thousands of animals are packed into barns for concentrated feeding operations, has proven to be efficient and profitable, but comes with its own set of problems.

From Washington state to North Carolina, federal lawsuits are challenging the livestock industry to change its ways, basing arguments on studies that increasingly show the impact that phosphorous, nitrates and bacteria from fertilizer and accumulated manure have on lakes and rivers, as well as air pollution that can be harmful to respiratory health.

“Livestock farmers insist they’re trying to ameliorate the problem by installing grass strips, tilling less and using other techniques to keep manure and fertilizer from draining into waterways.”

The AP article noted that, “The hog industry’s shift from small family farms to large-scale farms is dramatic, going from more than 200,000 in the early 1990s to just over 21,600 in 2012.

“A driving force behind some of the large-scale hog farms is Murphy-Brown LLC, which became part of the world’s largest pork producer when China-based WH Group bought corporate parent Smithfield Foods in 2013. WH Group aims to feed China’s appetite for meat with cheaper hogs from the United States, and that foreshadows increased production in the U.S., according to lawsuits filed in eastern North Carolina.

“The water- and air-quality lawsuits are mostly driven by advocates of locally grown food as well as animal-rights and environmental activists. But in some cases, farmers are going after farmers.”

Keith Good