Nebraska farmers, ranchers wary of Trump ending NAFTA, which has quadrupled U.S. ag exports

Source: By Barbara Soderlin, Omaha World Herald • Posted: Tuesday, February 7, 2017

Like a lot of Midlands farmers, Randy Uhrmacher gets a little nervous when he hears in the news about President Donald Trump looking to shake up free trade agreements.

Trump’s push to renegotiate the North American Free Trade Agreement — even withdraw from the 23-year-old U.S. trade deal with Mexico and Canada — makes Uhrmacher wonder: What would that do to the market for the corn and soybeans he raises near Hastings, especially with prices already at their lowest in about seven years?

“If we lost that market, that would be devastating for the farmers in the United States,” Uhrmacher said.

Concerns like his — coming from deep-red Trump country — are why major farm groups and food processors are teaming up in a campaign to tell the president: Don’t throw the baby out with the bathwater.

They want to give agriculture a voice in the larger discussion around NAFTA, which often focuses on factories, not farms. Trump as a candidate called NAFTA the worst trade deal ever, citing a loss of manufacturing jobs and a trade deficit — meaning the United States buys more than it sells.

The United States has a deficit when it comes to agriculture trade with Mexico and Canada, though the industry has had a worldwide trade surplus since 1960. Even so, economists disagree that a trade deficit is necessarily a sign of a bad deal, and in agriculture, it can indicate the impact of exchange rates and the increasing diversity of the American diet, the Department of Agriculture said.

While farmers agree manufacturing jobs are important, they would prefer the president not throw a wrench in a deal they say has largely been good to agriculture.

“The importance of trade to America’s farmers and ranchers cannot be overstated,” wrote 16 groups representing soybeans, cotton, corn, milk, pork and more in a Jan. 6 letter. The groups warned of the danger of disrupting existing export markets, and pressed Trump instead to expand access to new markets, especially in fast-growing Asian markets.

NAFTA eliminated tariffs on most products, eliminated restrictions on the volume of products that could be shipped and cut back on red tape like inspections and certifications needed to ship grain across borders, Nebraska ag businesses said. It also established mechanisms for resolving trade disputes.

That kind of market access has expanded sales for U.S. agriculture.

U.S. food and agriculture exports to Mexico and Canada have more than quadrupled since 1993, to $38.6 billion in 2015. Those countries’ share of total U.S. ag exports has grown to 28 percent, from 19 percent, since NAFTA took effect.

A coalition of 133 groups tied to commodities, meatpacking, food processing and others sent a letter to the president Jan. 23 that highlighted that growth.

Among those signing were Greater Omaha Packing, the Omaha beef processor; Scoular, the Omaha grain handler; and meat processor Tyson Foods, a major Nebraska employer. Tyson processes beef and pork in Nebraska. Export sales made up nearly 10 percent of its $36.9 billion in sales in 2016, with Canada and Mexico among top markets.

Scoular signed on for the simple reason that U.S. farmers produce more food and feed than the nation consumes, and farmers and agribusinesses need ready access to export markets, senior vice president John Heck said.

Scoular has been in business in Nebraska for more than 100 years but made significant export gains in Mexico since NAFTA was signed in 1994, he said. The Omaha-based company has 1,200 employees, plus grain elevators, processing plants and offices across all three North American countries.

Thanks to NAFTA rules, “from our perspective Mexico is very much like a domestic market for us, and Canada the same,” Heck said.

Now, Scoular and its business partners in Mexico have an eye on Washington. Heck, who also serves as chairman of industry group National Grain and Feed Association, said he believes the Trump administration is listening to the ag industry. The association supports Trump’s pick of Georgia Gov. Sonny Perdue for Secretary of Agriculture.

Meanwhile, the trade talk has created uncertainty. One Scoular customer in Guadalajara that was expanding its capacity to produce more livestock feed is now unsure whether to proceed with that investment, Heck said.

Steve Nelson of Nebraska Farm Bureau said he pressed Perdue on the need to expand agricultural trade during a Thursday meeting in Washington, even if it’s negotiating deals one-on-one with each country, as Trump has said will be his approach.

Agriculture exports account for about a third of U.S. farm income, he said. In shaking up deals the United States risks disrupting existing trade patterns and the good relationships it has with trading partners, and the possibility of retaliatory tariffs.

If Trump is thinking of pulling out of NAFTA, the Nebraska Cattlemen want an alternative plan in place ahead of time. The group is urging Nebraska’s congressional delegation to protect agriculture, said Jessie Herrmann, the beef group’s director of legal and regulatory affairs.

“We really have to be thinking about feeding the world — that’s what the future of our industry is,” she said.

Nebraska’s smaller crop sectors are speaking up, too.

Mexico is the top importer of U.S. dry beans. So changes to trade deals worry Kevin Kelley, president and chief executive officer of Scottsbluff dry bean marketer Kelley Bean.

“We have steady business there,” Kelley said. His family’s 90-year-old business employs 250 in eight states. “The most important thing, we think, is to be very cautious opening (NAFTA). We’d prefer it not to be opened.”

The worry might sound strange coming from parts of the country that overwhelmingly voted for Trump. Kelley said this is a rare policy area where he disagrees with the new president.

“I’m totally in favor of President Trump, and I’m totally excited about our new beginnings here,” he said. “It’s such a great country. But we just need to make sure that our voice is heard. … We need to make sure we don’t lose ground as far as U.S. agriculture.”

Newman Grove soybean farmer Greg Anderson said he’s all for an improved NAFTA if it can be done.

“We’ve worked hard to create demand for (soy), and any trade policies that can help us move more product is what we’re looking for as farmers,” he said. “We have to rely on exports to be profitable.” Soybean shipments to Mexico increased five times under NAFTA, to $2.4 billion in 2015, the American Soybean Association has said.

At the same time, Anderson hopes Trump doesn’t open a can of worms and make farmers’ situation worse.

Trump in January floated a 20 percent tariff on goods imported from Mexico — to pay for a border wall — which set off fears of a spike in the cost of imported goods and a retaliatory trade war that could harm the Nebraska ag industry.

Arlington cattle feeder Bill Rhea is counting on those close to the president to make ag’s case. He said it’s hard to know what to expect with a volatile personality like Trump’s, and with a leadership environment in Washington where “it looks as though all conversation is coming from the top down.”

For all the support for NAFTA, some farm groups do want change.

“We can do better,” said John Hansen, of the Nebraska Farmers Union.

The group says the NAFTA trade deficit has meant lost jobs, in agriculture as well as manufacturing, because Americans are buying products made cheaply elsewhere.

Still, Hansen questions Trump’s ability to improve the deal.

“It is a delicate matter, which is one of our worries with President Trump: He is not delicate,” Hansen said. “But we do need to have a discussion about how we come out with a better outcome other than just one big massive deficit after another.”

Most economists take the opposite view, even if some voters don’t, said Wes Peterson, professor of agricultural economics at the University of Nebraska-Lincoln.

A trade deficit sounds like a negative, he said, but it’s not necessarily — it can lower consumer prices by making lower-priced foreign-made products like clothing and electronics available to U.S. shoppers. Plus, American companies rely on low-priced imports of supplies and parts they use to make and export their own products, he said.

Each country fighting to export more than it imports “is completely incoherent when you think about the world as a whole — we’re not trading with Mars.”

It’s still unclear how Trump would approach negotiations or what his specific goals are for trade with Mexico and Canada, Peterson said.

But the president’s continued esteem in the eyes of some rural voters could hinge on how he handles trade.

From Hastings, Uhrmacher said, “There’s a lot of things he’s done that are very pleasing to me. I’m hoping on some of these issues he doesn’t make any rash decisions.”