Washington Insider: Cargill, Cattlemen, Others on Trade, Immigration

As they await the upcoming Senate confirmation hearing on Sonny Perdue as Secretary of Agriculture, many ag leaders are examining all the tea leaves available, looking for ways to convince the administration that it would make good policy to work to keep and expand ag markets, especially in North America and China. Perdue is expected to support such efforts, as he did through his private business and as Governor of Georgia.Last Week the CEO of a major agribusiness, Cargill spoke forcefully to warn of potential harm from policies on trade and immigration, Bloomberg is reporting.Cargill Inc., the largest closely held U.S. company, is attracting some notice as its chief executive became the latest corporate leader to voice concerns about the administration’s proposed trade and immigration policies. In a speech and an opinion column, David MacLennan warned of the economic dangers posed by curbs to legal immigration. He also raised the specter of trade protectionism risks that could create food shortages and even spark armed conflicts."The current climate has many of our smartest people from outside the U.S. questioning whether they want to stay here," he wrote in the Huffington Post on Friday. "We don’t want to drive away talented people and their innovative thinking. It would weaken not only our food system, but the U.S. economy.”Bloomberg comments that the substance of MacLennan’s comments isn’t totally surprising since the 152-year-old company was already a supporter of trade liberalization and immigration reform. However, it is unusual for Cargill’s leader to step into the middle of a fierce national political debate, the group said.Cargill says it is “eager” to improve NAFTA but “not dismantle it,” according to MacLennan. In fact, any slowdown in the flow of international trade would be a problem for Cargill and competitors such as Archer-Daniels-Midland Co., Bunge Ltd. and Louis Dreyfus – the so-called ABCDs of global agricultural trading, whose overseas operations provide markets for millions of tons of Midwestern ag products."We cannot wall ourselves off” from the 96% of the global population that lives outside the U.S., MacLennan said Friday in a speech at the University of St. Thomas in St. Paul. “We’ve seen what happens when protectionism disrupts the free flow of food,” he said. “It can provoke famine, cause conflict and even war."In another effort to dramatize the potential impact of overseas market interruptions, the largest U.S. cattle trade group argued that a shakeup of NAFTA now would come as domestic beef output is forecast to rise to a six-year high, meaning that the industry must continue to export or face a chronic oversupply according to Kent Bacus, director of international trade and market access at the National Cattlemen’s Beef Association (NCBA)."Americans are not going to eat more beef at the same price,” said Bacus said. “If there’s a surplus, we have to move that product to other countries, and to sustain the expansion, we need to expand export markets.”U.S. beef exports rose 78% by volume since 1993, the year before NAFTA was enacted, USDA says. As of 2015, Mexico was the largest foreign buyer of American beef and Canada was No. 4, according to the U.S. Meat Export Federation.NAFTA “has been a very lucrative opportunity because of strong demand in Mexico and Canada,” Bacus said. He added, “those kinds of hungry export markets are badly needed. U.S. cattle inventory expanded in 2016 for a third straight year, the longest stretch in a decade.USDA says it expects domestic beef production will rise to 26.02 billion pounds and exports to 2.64 billion pounds, the highest levels since 2011. The meat will also have to compete with record production of pork and chicken.The President said Thursday he wants to begin 90 days of consultations on NAFTA, which has been in place since 1994 and eliminates trade barriers between the U.S. and its two neighbors. While Trump has labeled the deal as unfair, U.S. exports of many agricultural products to Canada and Mexico have soared since it was enacted, Bloomberg says.NCBA, which represents cattle producers and feeders, also has bemoaned the U.S. withdrawal from the Trans-Pacific Partnership, the proposed 12-nation Pacific trade pact according to Colin Woodall, the NCBA’s vice president of government affairs.So, it will be interesting and important to see how the administration handles ag trade policies. Given Governor Perdue’s background, it is hard to believe he won’t have something comforting to say to the farm groups that now fear loss of export markets. So far, the Perdue hearings have not yet been scheduled, but likely will be soon—and, well attended and closely watched, Washington Insider believes.