Iowa corn and soybean farmer April Hemmes gives a quick video update here on farming in May 2020, as she deals with both planting a corn crop and juggling the social distancing needs during corona restrictions. It’s a peek at her field, a look at her tractor and discusses changes brought to farming families and farmers by COVID19.
May 2020 is a time when farmers are planting crops, despite knowing that the harvest prices are likely to be low. They are watching the heartbreaking choices that livestock farmers are making when there are few channels to send their livestock.
April Hemmes is an award-winning farmer-leader in Iowa and advocate for agriculture, for women in agribusiness and enthusiastic about sharing her insights from the field in the US. Her energy and practical optimism is something we at Meros really appreciate.
Our friends at Women in Agriculture (WIA) in the US produced this report from the field as part of their new Women in Agriculture Resource Center, which offers current insights and responses from US farmers and agribusinesses on the impact of COVID19 on global food and agriculture supply chains. WIA has kindly added Japanese subtitles to this video for us! 日本語字幕付き!
A Meros Consulting study released Wednesday by the U.S. Dairy Export Council projects that the two new trade agreements made by Japan will benefit global dairy suppliers such as the EU and Oceania, while costing the US dairy export industry billions of dollars in lost sales.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) entered into force on Dec 30, 2018 and the Japan-EU Economic Partnership Agreement (JEEPA) went into effect today, February 1st, 2019. All major dairy suppliers to the Japanese market, including Australia, New Zealand, Canada, the Netherlands, Germany, Denmark, Ireland and France, are included in one of these two agreements. Only the United States is missing, after pulling out of TPP negotiations in January, 2017.
Through industry interviews to assess price sensitivity and product substitutability, together with extensive historical data analysis, Meros developed a model to quantify the future economic impact of those agreements on key U.S. dairy products and ingredients over the next two decades. The study showed that the US could double its market share with a level playing field. However, without quick action by the US to regain competitiveness in the market, US dairy exports will be at a strong competitive disadvantage, particularly for cheese, whey and lactose, resulting in lost US sales of $5.4 billion over 21 years.
Now is a particularly critical time for global cheese suppliers to Japan as Japan’s cheese imports are expected to show a 1.6-fold expansion over the next 10 years under CPTPP and JEEPA. As a result, the US dairy industry is supporting further bilateral trade talks with Japan. As USDEC CEO and President Tom Vilsack commented in a January 30th news release, “U.S. dairy farmers and processors strongly support the Administration’s launch of trade talks with Japan. We hope this report provides fresh ammunition to our negotiators about why a strong U.S.-Japan agreement is so important for American agriculture.”
U.S. Dairy Export Council’s release of Meros Consulting’s Analyzing the Impact of the CPTPP and Japan-EU EPA on US Dairy Exports to Japan can be downloaded here:
Analyzing the Impact of the CPTPP and Japan-EU EPA on US Dairy Exports to Japan
When Meros first visited China in July to discuss the brewing trade war and its potential impact on US agricultural exports, Chinese ag traders were optimistic.
This may blow over in a few months, they assured us. But by September and October when we returned and discussed dairy, grains and soybeans, the mood was decidedly more resigned.
As of this first week in December 2018, where are we?
The trade situation changes weekly and certainly impacts different US agricultural products differently, but there were several common themes among our talks with Chinese ag trade experts.
- There is both optimism and pessimism about the future of US agriculture trade: When talking to a range of people, from Beijing policy makers to Shanghai importers, it is the policymakers and academics who are far more pessimistic than traders and industry players. Policymakers see the conflict through the lens of government-to-government conflict and this tension is likely to continue, even as one tariff is replaced by some other barrier.
- Chinese traders are looking for other suppliers of agricultural and food products and there is no guarantee they will return to US supply even after the trade war abates. While some Chinese buyers and their US suppliers initially tried to share the tariff burden or freeze prices at pre-tariff levels in the hope that the tariffs would soon be dropped, this is increasingly unsustainable as the war drags on.
- The chance to diversify suppliers and develop new trade relationships is considered a good opportunity for China. Both policy makers or traders saw a good chance for China to focus on both its own domestic agriculture industries and supply chain infrastructures. It is also a chance to deepen relationships with new suppliers around the world and support them in strengthening logistics, an area that the US would normally have an advantage.
- Trade is flexible. If direct routes to the China market are stopped, products tend to find a way to be rerouted, processed or exchanged through third-countries. Reports of US soybeans heading to Argentina for storage until the trade war abates or products routed through Vietnam are already initial indications of global trade doing what it always does – readjusting.
- It is a chance for Chinese companies to expand into new and growing markets, including Vietnam or Indonesia, where US agricultural commodities and ingredients are more easily available. “See you in Vietnam!” joked one Chinese feed trader, as she described their new operations in Hanoi where they expect to be able to continue their US feed grain imports.
The interest by China central government to strengthen global grain, oil seed and food supply options and build up trade logistics is clear from the effort put into its One Belt One Road initiative, an ambitious policy of trade development from China through central Asia as far as Europe, using a variety of investments and incentives.
While Chinese traders and importers scrambled to adjust their suppliers for many products, there was no sense of impending doom. Overwhelmingly, it was disappointment at how unpredictable agricultural trade with the US has become. Whether this confidence is well placed or overly optimistic will become clearer in the next months.
Meros Consulting is a Tokyo-based strategic business advisory. We work with companies and governments globally to advising on trade dynamics and support business development in the food and agriculture industries.