Contact Us I Subscribe I Advertisers


A golden harvest near Oakesdale.
Photo by Teresa Hodges

FMC

CLS

WESTBRED

POLICY

TRADE, TARIFFS, FARM BILL

2018 convention keynote speakers, panels focus on issues facing ag industry

December 2018
By Trista Crossley


For a few days last month, wheat farmers from the Pacific Northwest traded in the farm for a convention center in Portland, Ore., where trade, tariffs and other ag-related issues featured prominently on the menu.

Two panels of experts and presentations from top officials from the U.S. Department of Agriculture and the Office of the U.S. Trade Representative detailed the state of agriculture and the issues the industry faces, both nationally and at home.

National organizations zero in on ag issues

The first panel, moderated by Spencer Chase, Agri-Pulse’s deputy managing editor, featured Chris Kolstad, chairman at U.S. Wheat Associates (USW); Dwight Little, president of the National Barley Growers Association (NBGA); Ben Sholz, vice president of the National Association of Wheat Growers (NAWG); and Tim O’Connor, president of the Wheat Foods Council (WFC). This panel focused on some of the issues the wheat industry is currently facing, from tariffs and trade agreements to the 2018 Farm Bill.

Chase started the session by giving an overview of the current farm economy, adding that net farm income is forecast to decrease 13 percent in 2018. While trade is certainly an important issue, he said the midterm elections could have a large impact as well, especially where the farm bill is concerned. If Congress can’t pass the 2018 Farm Bill during the lame duck period, the House’s switch from Republican to Democrat control could throw a wrench into the works. He sees House Democrats who are very interested in nutrition but not really interested in farm policy.

“An education process will be needed,” he said.

In wrapping up his presentation, Chase said Congress has two main items on their lame duck agenda:

• Funding the government by finalizing seven appropriations bills; and

• Passing or extending the farm bill. December is the deadline when most baseline program funding runs out. Reportedly, the ag committees are still struggling to come to agreement on the nutrition, commodity and conservation titles.

Turning to the panel, Chase asked the participants to list their organization’s biggest issues, as well as the things they are most excited about. The answers included:

• NAWG. Sholz said one of the industry’s biggest hurdles was connecting the dots between producers and consumers, but that he was excited about the new technologies that researchers have been using, such as gene editing and hybridization.

• USW. For Kolstad, the biggest hurdle is getting the 2018 Farm Bill passed so overseas marketing funds would be restored. Trade issues with Japan and China are also on USW’s radar. Kolstad said USW is excited about the potential U.S. wheat markets in south Asia and Latin America.

• NBGA. On the barley front, Little said U.S. barley acreage continues to shrink, which threatens already scarce resources and the sector’s ability to influence policy, but his industry is excited about barley’s potential food value.

• WFC. Nutrition was also on O’Connor’s mind, as he said nutritional guidelines are his organization’s biggest issue. The WFC has been working with personal trainers to focus on well-rounded diets instead of the latest fad diet. He added that there are some amazing foods in the wheat portfolio, from cakes to cookies to bread. “People love and eat wheat foods all the time. It’s fun to work on a product that touches that many people,” he said.

PNW export panel

Washington State University Ag Economist Randy Fortenbery moderated a panel of exporters who discussed policy implications on grain once it leaves the farm. Fortenbery began by stating that in his opinion, the U.S. is “in the midst of the most aggressive renegotiation, realignment of trade from the U.S. perspective that we’ve done since the 1920s.” This realignment, he explained, is based on the perception that in the last three or four decades, the U.S. has been significantly taken advantage of in the trade arena. He laid out the timelines of the Trump Administration tariffs and gave his perspective on the current trade situation:

• Supply chains and firms are much more integrated across geo-political landscapes compared to past decades. This makes it very difficult to target individual countries, and trade “management” can result in significant unintended consequences.

• Trade wars are not easy to win and determining outcomes beforehand is challenging.

• It is impossible to design compensation schemes that make victims of trade distortions whole in the long term.

• Many firms can adapt to a change in trading environments that are predictable and stable, but will have much more difficulty in managing the volatility associated with continual rules changes.

“What often happens in policy, not just trade policy, but policy in general, we sort of think we have this laser beam focus on a particular problem. We invoke a policy remedy, and then there’s a second-phase cost that we didn’t anticipate that comes back to us,” he said. “We almost always have a give and take, and the real question about trade policy is what’s the net benefit or is it a net cost, and how do we evaluate those going forward?”

The panel consisted of three representatives of Pacific Northwest grain exporters who introduced themselves and gave their view on the current wheat market:

Kurt Haarmann from Columbia Grain. Haarmann said for the last two years, exports out of the Pacific Northwest have run at record levels in terms of total grains, with the last two years seeing 1.55 and 1.6 billion bushels of grain—roughly 1/3 wheat, 1/3 corn and 1/3 soybeans—moving through the ports. This year, that figure is likely to be closer to 1.3 billion due to the current trade issues. He said that within the tariff discussion, wheat sometimes gets lost, particularly when talking about China, and said the retaliatory tariffs are as much political as they are about economics and goes beyond price. The closure of the Chinese market to U.S. soybeans has forced U.S. farmers to change their whole market structure, forcing them to store soybeans rather than immediately sell them. He also said, in answer to a question about the U.S. Department of Agriculture’s (USDA) latest export forecast, that Pacific Northwest prices tend to be a little more stable due to our soft white wheat, so he didn’t expect too much of an impact if the industry doesn’t meet the USDA’s numbers.

Brian Leidl of United Grain Corporation. According to Leidl, United Grain Corp. stores about 8 million bushels of grain and is the largest and oldest facility on the Columbia River. He told growers that quality is the region’s best weapon. “When it comes to quality, nobody can match what we can do here in the PNW, thanks to your efforts and the whole system that has been devised.” Referring to USDA’s recent export forecast of 1 billion bushels, Leidl said it’s not impossible for the market to meet that, but that the window is closing rapidly. He agreed that the situation with China is mostly political and said the country is trying to prove it can go a year without importing U.S. soybeans, which will improve their trading position.

One grower asked about including China’s wheat stocks in USDA’s numbers. Leidl called the Chinese numbers a “wheat black hole” because it is unclear how accurate they are, but it appears that China is self-sufficient in wheat. He added that three countries hold the most wheat stocks—India, China and the U.S.—with the U.S. having the biggest stocks-to-use ratio. If there is a supply disruption, he explained, there is really no other supply of wheat other than in the U.S.

Damon Filan of Tri-Cities Grain, LLC. Filan focused more on the up-country elevators’ storage capacity and ability to get the grain to market. He said his business has moved from handling mostly government and country tenders to about 75 percent being private buyers. Filan is an industry representative on the Washington Grain Commission and has participated in many overseas market visits. He said he hears “quality, quality, quality” in just about every country he has visited, which has changed the way his elevator looks at storing and selling wheat. He said Indonesia is probably the next frontier for Pacific Northwest wheat exports, but it will take years to develop.

Jason Hafemeister, special trade council to the USDA Secretary

Hafemeister’s presentation was given via telephone as a storm on the East Coast disrupted his travel plans. He focused on some of the challenges, threats and opportunities facing U.S. agriculture. He said the top five export markets for U.S. agriculture are China, Canada, Japan, Mexico and the EU, and the U.S. is facing tariffs in all those countries.

The tariff situation began when the U.S. Department of Commerce decided that steel was important for national security, and steel imports should be limited to 20 percent of domestic consumption. The administration imposed tariffs, which were quickly matched by other countries imposing retaliatory tariffs. That same reasoning is being used to consider an increase in auto tariffs. Hafemeister said the top six U.S. ag markets are responsible for 95 percent of the auto and auto parts imports to the U.S.

“If we somehow get into some sort of trade war for autos, there is a potential exposure for agriculture to be caught with retaliatory tariffs as we saw with steel. Something to be watched very closely here,” he explained.

On the China front, Hafemeister said the size of the trade deficit and not protecting intellectual property have been concerns for the U.S. and that it is an unbalanced trade relationship. There have also been concerns that China is taking U.S. manufacturing jobs.

Turning to the North American Free Trade Agreement (NAFTA), Hafemeister said approval of the trade agreement has gone up as people realize what the U.S. would be losing. “It’s hard for us to do much better (in Mexico) than we are right now,” he said. “Agriculture has a big stake making sure the USMCA (the new NAFTA) gets through Congress.”

Finally, Hafemeister addressed the World Trade Organization (WTO) dispute process. He said in general, agriculture has been very successful in pursuing cases via the WTO, but that the administration has concerns that the judges are becoming more political in how they decide cases. He added that the WTO needs a common set of rules to judge cases by.

Gregg Doud, chief agricultural negotiator in the Office of the U.S. Trade Representative

Fresh off a trade mission to Morocco (literally, he flew into Portland straight from that country), Doud gave the audience a bird’s-eye view of what the current administration is doing with regards to agriculture and trade.

Doud said a big difference between negotiating in agriculture is that “…we can’t grind them (the other guys) into the ground. We have to have a relationship with the person across the table because they are going to be with us for a long time.” Nowhere is that more true than in Japan where Canadian, Australian and European wheat will eventually become cheaper than U.S. wheat when the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP is the agreement that replaced the Trans-Pacific Partnership) goes into effect at the end of this year. The U.S. is not part of the CPTPP. The good news, Doud said, is that the administration has announced they are ready to start working on a bilateral trade agreement with Japan. He added that according to some economic analysis, if a deal isn’t made, wheat is the commodity that will be hurt the worst, followed by beef and pork.

“If you lose that market share, I don’t know if you’ll ever get it back. I understand how important this is to get this right and get this done and get it squared away as quickly as we can,” he said.

Pivoting to China, Doud said he is hopeful that a planned meeting between U.S. and Chinese officials at last month’s G-20 summit meeting will “…hopefully lead to another conversation, and hopefully that will lead to another conversation and to another conversation, which finally gets us to sit down to talk and sort this out.”

Doud said one of the main issues the U.S. has with China is the country’s subsidies to their wheat, corn and rice farmers, which have been estimated to exceed their World Trade Organization (WTO) limit by $100 billion. They have also imported less wheat than their WTO obligation requires.

“If they had fully implemented what they agreed to do when they became a member of the WTO in 2001, they should be importing every year about 9.6 million metric tons of wheat. They’ve never done that,” he said. The U.S. is having many of the same issues with India.

In Europe, Doud said there are too many activists making money by talking about the food consumers are eating, and the restrictions some countries in Europe are placing on pesticides and antibiotics are presenting huge challenges to U.S. agriculture.