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Iowa Ideas

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USDA is putting money into developing new markets

But can it cover losses from tariffs?

Sep 19, 2018 at 2:05 pm
    Grain trucks hauling soybeans are lined up to check into the Cargill Cedar Rapids East processing plant in northeast Cedar Rapids, Iowa on Wednesday, Sept. 19, 2018. (Jim Slosiarek/The Gazette)

    Agricultural groups from Iowa and other states plan to ramp up trips to find new export markets in the midst of disputes with traditional trading partners.

    But some Iowa trade experts fear even those additional markets won’t cover their losses.

    The federal government already gives millions in grants to commodity groups and agricultural exporters for trade missions via the farm bill, to the tune of approximately $26 million each year.

    The USDA earmarked an extra $200 million to a similar program designed to help expand markets with possible trading partners, as part of a larger initial $6.1 billion farm aid package designed over the summer to soften the financial blow of Trump administration-imposed tariffs on major trading partners such as Mexico, Canada and China.

    Those countries have placed counter-tariffs on U.S. imports, particularly agricultural commodities such as corn, soybeans and pork. Foreign buyers then turn to other countries without tariffs.

    Chad Hart, an Iowa State University agricultural economist, said commodity groups and economic developers apply for portions of the market development funds to advertise abroad and develop relationships with potential customers.

    Many of the groups, Hart noted, are targeting countries in Southeast Asia as well as developing countries including India.

    “You’re looking at a lot of the same growth dynamics that we’ve seen in China, you’re seeing basically not only strong population growth but strong income growth in that area, and that tends to be the sweet combination of not only more people to sell to, but more money with which they can purchase products from us,” he said.

    “There has been a lot of concentration across the board from U.S. agriculture in developing stronger trade relationships there.”

    Mike Paustian, a farmer near Walcott and a member of the Iowa Pork Producers Association board of directors, said pork producers already were seeing tight margins due to factors other than tariffs, and reduced market access to major pork buyers Mexico and China aren’t helping the situation.

    He said pork producers are hoping to expand sales in southeast Asian countries now, despite the United States having had the chance to form a multilateral deal with those countries via the Trans-Pacific Partnership — a now-defunct trade proposal among the United States and 11 other countries on the Pacific Rim.

    Trump pulled the United States out of the deal last year.

    “Of all the deals to have come along, that one (the TPP) really had the potential to secure the future of the pork industry so far as our exports go,” he said.

    ... When that went away, we were hopeful to see progress made in bilateral agreements since the current administration said that was their preference instead of these big multinational deals, and that’s fine, but we need to make them happen.”

    The dispute with China escalated further earlier this week after President Donald Trump announced plans for another $200 billion worth of tariffs on Chinese goods on top of the $50 billion already in place.

    In response, Chinese officials said they would implement up to $60 billion in tariffs.

    USDA officials previously have said the aid package could be doubled to $12 billion if the trade disputes aren’t resolved as quickly.

    The trade representatives also use overseas trips to pitch novel ideas for industry abroad, such as using corn as a cheap source of feed for fish farms. ISU’s Hart said that could work in countries that have large fish-farming industries, for example.

    John McGlothlen / The Gazette

    But while expanding into new markets can help producers in the short term, it likely won’t cover the large losses U.S. farmers have seen in more established foreign markets — particularly in cases where major buyers have shifted their supply chains to source commodities in foreign countries that don’t have tariffs applied against their goods.

    Roger Zylstra, Iowa Corn Promotion Board vice president, said his organization is committed to opening new markets for U.S. farmers while protecting trade relationships that already exist.

    However, he said even if the trade disputes ended, it’s not likely the United States will recover all the market share it had before.

    “I think all of our general feeling is that once (commodities buyers) open up other avenues, they’ll continue to use those,” he said. “Definitely some of our market will return, but I don’t think we feel like everything will go back to the way things were.

    “That’s not something that looks like it’s in the cards at this point in time,” he said.

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