USDA Reorganization Proposal Highlights Trade; China Trade Deal Includes Beef

Proposed USDA Reorganization – Trade

Donnelle Eller reported on the front page of Friday’s Des Moines Register that, “Opening markets for U.S. corn, soybeans and other farm goods would get more attention under a major reorganization proposal Thursday from U.S. Ag Secretary Sonny Perdue, who wants to create a new undersecretary for trade.

“With the farm downturn entering a fourth year, ag groups lauded the move.

‘In this farm economy, trade is more important than ever to farmers’ incomes,’ said Wesley Spurluck, president of the National Corn Growers Association.

Friday’s article noted that, “‘Wheat, corn, soybeans, all are under the cost of production,’ said Craig Hill, president of the Iowa Farm Bureau Federation. ‘The best way to get that above the price of production is to increase demand.’

“U.S. growers get about 20 percent of their total receipts from exports.”

The Register article stated that, “Perdue said the ‘new undersecretary of trade will wake up each and every day with one thought in mind: ‘How can I sell more American agricultural products to foreign markets today?”

“Perdue said in a U.S. Department of Agriculture video that the agency is already looking at candidates.” (see video below)

Meanwhile, Associated Press writer Mary Clare Jaloncik reminded readers in an article last week that, “On his second day in office last month, Perdue helped persuade Trump not to withdraw from the North American Free Trade Agreement with Mexico and Canada, arguing that doing so would hurt U.S. farmers. Trump has said he will work to renegotiate the pact instead.”

In a side note regarding U.S. agricultural export competitiveness, recall that USDA’s Economic Research Service (ERS) pointed out on Friday in its Feed Outlook report that, “Ample supplies in most exporting countries in 2017/18 are expected to support strong competition and limit price increases. The shift in global corn production in favor of South American and FSU [former Soviet Union region, mainly Ukraine and Russia] countries modified global trade, with the U.S. share of world corn trade trending lower.”

In its Wheat Outlook report Friday, ERS stated that, “The KRU region that comprises Kazakhstan, Russia, and Ukraine has been gaining wheat export share since the beginning of the 2000s, alongside the EU, its main competitor and the top exporter in 2013/14 through 2015/16, and is projected to regain its status of top wheat exporter in 2017/18. In Argentina, the recent reforms eliminating taxes and quotas for wheat exports that had burdened farmers for the past 15 years are expected to boost its wheat output and exports further. The gains by the EU, Argentina, and KRU in the global wheat market come mainly at the expense of the United States, whose share of world wheat trade is trending lower.”

Graph from “Wheat Outlook.” Jennifer Bond and Olga Liefert. May 12, 2017 (USDA-ERS).

In addition,  in an a column posted in The Wall Street Journal last week, Sec. Perdue also explained that, “Under the existing structure the Foreign Agricultural Service, which deals with overseas markets, is housed in the same mission area as the Farm Service Agency and the Risk Management Agency, which handle domestic issues. It makes much more sense to situate the Foreign Agricultural Service under the new undersecretary for trade. The other two agencies will be placed under a domestically oriented undersecretary of farm production and conservation. The goal of that position is to provide a simplified one-stop shop for the USDA’s primary customers: American farmers, ranchers and foresters.

The reorganization also will elevate the Rural Development agencies to report directly to me. This will ensure that rural America always has a seat at the table. Nearly 85% of America’s persistently impoverished counties are in rural areas. One in four rural children live in poverty, a rate not seen since 1986. Deep poverty—defined as having income less than half of the poverty threshold—is more prevalent among children in rural areas (12.2%) than in urban ones (9.2%). The vitality of small towns across America is crucial to the agricultural economy.”

DTN Ag Policy Editor Chris Clayton reported on Friday that, “The former head of the Farm Service Agency under the Obama administration is among those supporting at least parts of the USDA reorganization plan rolled out this week by Agriculture Secretary Sonny Perdue.

Val Dolcini, who led FSA from 2015 until leaving last January, told DTN that farmers, ranchers and landowners would benefit from the Trump administration’s plan to bring under one umbrella the FSA, the Natural Resources Conservation Services and the Risk Management Agency.

“‘This is an opportunity really to better serve USDA’s customers,’ Dolcini said. ‘Having these agencies together under the same undersecretary would remove some of the territoriality that goes on in government.'”

Mr. Clayton added that, “Under the reorganization plan rolled out Thursday, those three agencies — FSA, NRCS and RMA — would all be under one ‘undersecretary for farm production and conservation.’ Dolcini noted that position would become one of the most influential and powerful undersecretary positions in the federal government, overseeing more than 2,200 USDA offices nationally and roughly 25,000 or so employees.

“‘That’s going to be a key position that will have a lot of influence,’ he said.”

Trade Developments- USTR Confirmed, China Trade Deal

In other trade related news, 

Nebraska’s beef industry is celebrating a long-sought win with news that China has set a July deadline for resuming imports of U.S. beef after a 13-year ban.

“But it remains to be seen just how loudly cattle producers should cheer, analysts said.

There are many details still to be learned before the July 16 deadline — things like how much beef China will buy from the U.S., what any tariff structure would look like, and what if any restrictions there will be on how the imported beef is raised. The tentative agreement was announced late Thursday.”

Saturday’s article explained that, “Beef consumption has been on the rise in recent years in China, and the nation has emerged as one of the top beef markets in the world, said Kate Brooks, professor of agricultural economics at the University of Nebraska-Lincoln. She said China has significant potential as an export market, but cautioned it could take several years for the U.S. to realize that potential.

‘In the short run U.S. beef will have to establish market share in China,’ she said. The U.S. will compete with imports from countries including Brazil and Australia.

“Exports in the short term also may be limited by any restrictions on U.S. beef, including rules regarding traceability and any restrictions on the use of hormones, Brooks said.”

Ms. Soderlin added that, “Whatever the size of the real opportunity in China, Nebraska stands to benefit as much or more than any other state, officials said.

“The state is a top cattle producer and leads the nation in feeding and slaughtering cattle, with several major packing plants. Nebraska farmers, who grow the corn that fattens the cattle, also stand to benefit, as do the many related agricultural businesses.

In a statement on Friday, Sec. Perdue indicated that, “We will once again have access to the enormous Chinese market, with a strong and growing middle class, which had been closed to our ranchers for a long, long time.”

Former House Ag Committee Chairman Frank Lucas (R., Okla.) noted on Friday that, “For states like Oklahoma, which produces more than it can consume in ag and energy products, it’s critically important we identify new opportunities to trade our products into the world market.”

Wall Street Journal writers Jacob M. Schlesinger, Christopher M. Matthews and Jacob Bunge pointed out on Friday that:

“In addition to beef, China agreed to accelerate the process for approving U.S. biotechnology products.”

The Journal writers added that, “In return, the U.S. promised it would remove obstacles to importing Chinese poultry meat and pledged that it ‘welcomes direct investment by Chinese entrepreneurs,’ reassuring words at a time when Washington is heightening scrutiny of Chinese investment as a national security threat.”

Friday’s article explained that, “China also agreed to convene its national biosafety committee by the end of May to evaluate eight pending biotechnology product applications, which have awaited approval from Chinese crop regulators.

The Trump administration’s effort to hasten China’s regulatory reviews for genetically modified seeds follows years of complaints by crop developers about the country’s lengthy and opaque approval process. The move could help seed companies like Monsanto Co. , Syngenta AG and Dow Chemical Co.”

Commerce Secretary Wilbur Ross also indicated recently on CNBC that, “We’re not finished negotiating with China.” (video clip available below).

Keith Good

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He is well known in agricultural circles for the daily FarmPolicy.com News Summary.