U.S. deal with Canada to update NAFTA encouraging, but SD ag leaders still express worries
PIERRE, S.D.—They're getting the NAFTA band back together and some farm interests are hoping they're going to rock.
That was the news from this week: U.S. trade officials inked a deal with Canadian trade officials that would reprise the North American Free Trade Agreement. Since Mexico signed a NAFTA pact with U.S. trade negotiators in August, that re-forms the trio that forged NAFTA in 1994.
President Donald Trump campaigned on promises to go after foreign trading partners who he says have unfairly imposed tariffs on U.S. products. Trump says this hurts the U.S. economy and U.S. workers.
On Monday he touted the new pact with Canada as him doing what he said he would do and said "These measures will support many — hundreds of thousands — American jobs,"according to news reports from the White House.
The Washington Post reported that the deal appeared to be a victory for American trade interests and Reuters included that Canadian Prime Minister Justin Trudeau saved face by getting a particular trade concession.
While China has been the big dog which Trump has spent the most time criticizing for its trade practices and toward which the Trump administration has aimed U.S. tariffs on Chinese goods as retaliation, Trump also had criticized NAFTA as unfair to the United States.
He's rejected multilateral trade talks, saying he wants U.S. negotiators to work one-to-one with nations and says that will get America better deals.
Many trade experts have warned that Trump's aggressive style might undo many trade arrangements that will end up hurting the American economy.
Trump has gotten the attention of U.S. trade partners.
Just 10 months ago, Paul Connors, interim consul general for Canada in Minneapolis for several states, including South Dakota, was in Pierre saying how important Canada's trading partnership is with the United States.
Canada is, in fact, South Dakota's biggest export customer, and it's mostly agricultural products, Connors said. He said 28,600 jobs in South Dakota are dependent on trade with Canada and the state exports about $455 million in goods to Canada each year.
And he was doing similar trips in nearby states, admitting that Canadian trade officials were concerned about Trump's bellicose methods.
U.S. Sen. John Thune, R-S.D., on Monday, in a news release from Washington said it looked good.
"While I'm still reviewing the details of the agreement, an improved NAFTA would be good for businesses, consumers and the economy, and I hope we can continue pursuing pro-America trade deals with other countries around the world."
The deal announced Sunday with Canada needs to be approved by Congress.
"Throughout this process, I've always believed a trilateral agreement would best serve American businesses, particularly South Dakota's farmers and ranchers who depend on exporting a significant share of their products to Canada and Mexico," Thune said.
Foreign trade is ever more important for farmers as South Dakota's farmers are following the national trend to planting and harvesting more corn and soybeans nearly every year in a long term trend.
This year the state's farmers are projected to produce a record 277 million bushels of soybeans, federal bean counters announced in mid-September. Every year, the state's 11,000 soybean growers need export markets to buy up about 70 percent of their soybeans, South Dakota Farmers Union officials say.
China is the biggest foreign buyer of the state's soybeans, says Doug Sombke, president of the South Dakota Farmers Union. That makes it reaching a better trade atmosphere with China is as important, or more so, as the NAFTA officials say, which makes a trade tariff war with China hit farmers in the pocketbook.
On this, the South Dakota Farm Bureau can find a lot of agreement with Farmers Union leaders, although historically the two groups have had their differences. Both have their state offices in Huron, and Farmers Union lines up with Democrats and Farm Bureau with Republicans, generally speaking..
Both groups support the NAFTA news, but with some nuances.
"The good news is that it looks like it's on track to being back together," Sombke said on Tuesday while he was trying to combine soybeans or corn in damp conditions. He farms near Conde, about 40 miles southeast of Aberdeen. "But the same guy that put it back together is the guy who tore it apart. It's like an arsonist coming back and saying he will save your house with a fire hose."
Scott VanderWal, president of the South Dakota Farm Bureau and a farmer near Volga, was winging his way to Washington on Monday for a regular meeting of national Farm Bureau leaders.
"We think it's good news for a couple of reasons," he said of the Canadian trade deal."First of all it shows that the administration can close the deal. At least we think they are very close . . . And second, we have been hanging on for a while with Mexico with the hope that would put pressure on Canada to go along with it as well."
The new deal appears to eliminate a practice of Canada dumping certain milk products on the world market which was pushing milk prices down, he said.
. "And they've also expanded their markets, making them available to us in a greater way," he said.
In its quarter century, NAFTA "has been very good to American agriculture — with a few exceptions, such as vegetable and fruit producers," VanderWal said. "And for Mexico and Canada it's been very good for their agricultural industries."
Both countries are among the top customers for U.S. agricultural products, he said.
It's a time of need for farmers in the United States, and South Dakota, farm leaders say.
The whole Trump trade agenda has been of big interest to farmers in South Dakota because the sharply increased production of most farm products the past four decades means farmers need export markets more than ever to be customers for their wheat, soybeans, corn and meat.
In September, leaders of the state's two big farm groups, the South Dakota Farmers Union and the South Dakota Farm Bureau went to Washington to lobby.
VanderWal met with Trump himself on Sept. 5 in what was described by Farm Bureau officials as an unscheduled hook-up that included Farm Bureau leaders from other states. Trump crashed a meeting of the farm leaders with Vice-President Mike Pence, saying "he wanted to stop by to express his appreciation for agriculture, as well as his broad support for rural America," according to SDFB officials in a news release.
VanderWal said on Monday it was a surprise and it gave farm leaders a good chance to tell Trump directly how important it is for American agriculture to keep good relations with trade partners.
Sombke, meanwhile, took part in the annual National Farmers Union Fly-In on Sept. 14 in Washington aimed at lobbying Congressional leaders.
The 30 or more South Dakota farmers who took part in the Fly-In was the largest group of young farmers to make the trip and shows how much trade deals mean to farmers, Sombke said.
He's not so sure Trump improved things much with the Canadian pact, Sombke said..
"We don't even know what the deal is yet. There are a lot of fine, moving parts in this agreement. I'm not saying (NAFTA) didn't need addressing. But from the farmers' point of view, this president promised he was a friend to the farmer, and by God, I haven't seen that yet." Country-of-origin labeling is important to Farmers Union members and that has not been picked up by the Trump administration, Sombke said.
Family farmers will get hurt, perhaps, more than helped, from NAFTA changes and other trade battles and tariffs by Trump, Sombke said. Tariffs on steel and aluminum from other countries means "autos are going to cost more. I don't see where American farmers are going to do better under this new NAFTA."
On Monday, prices to farmers at grain elevators in central South Dakota for corn, at about $3.90 a bushel, are below typical break-even levels, VanderWal said.
Elevators aren't even offering a cash bid for soybeans because prices have been so low, VanderWal said.
The Chicago futures price was $8.58 a bushel for the nearby contract on Monday, which is $2 or more below what it was this spring. Demand is so shaky — largely because of the trade fights with China, the biggest customer for U.S. beans — that the "basis," or the discount to move grain from the farm to the terminal market on the West Coast, is as high as $2 a bushel in some North Dakota locations, VanderWal said. Buyers aren't buying, he said.
Sombke sees it the same. "We've got to fix our relationship with China," Sombke said. "That is huge. When the Pacific Northwest shuts down its shipping, that hurts us tremendously."
"That's exactly why we promote the use of higher-blended ethanol (fuel mixtures) so we can get away from depending on other countries."
At the farm level, as big corn and soybean crops are coming off the fields of South Dakota, it all means there isn't enough room to store grain because not much has been moving out.
Soybeans don't store well in the outdoor piles often required when supplies outstrip the bin space on farm and at elevators, VanderWal said.
With South Dakota farmers projected to harvest a record 277 million bushels of soybeans this fall, and near-record corn bushels, that could pose some practical problems, VanderWal said.
By Sunday, 21 percent of the soybean crop had been gleaned, which is a typical harvest pace, USDA reported on Monday.
Corn harvest was 11 percent complete.
"Beans are going into storage and we'll see a lot of corn piled on the ground," VanderWal said.