ANALYSIS: US agribusiness faces “unprecedented” trade threats

Last Friday’s threat by the EU to tax US corn imports will have a minimal impact on US farmers, but it comes as US agribusinesses face a series of trade-related threats that could sour relations with five of the country’s biggest export destinations.

The EU now joins Mexico, China, Japan, South Korea and Canada, which are all either involved in active discussions to revise long-standing trade agreements or are embroiled in an evolving trade spat.

With agriculture exports often in the firing line as a means of retaliation, sources attending the National Grain and Feed Association’s (NGFA) gathering told Agricensus that the export markets US farmers often rely on to boost margin are facing “unprecedented challenges”.

With the EU only importing about 750,000 mt a year of corn from the US, the Commission’s statement on Friday to tax corn imports at 25% is not particularly damning to farmers.

But it comes on top of US attempts to renegotiate the NAFTA free trade bloc, which unites it with Mexico and Canada, as well as an emerging tit-for-tat fledgling trade war with China that is likely to harm sorghum exports and more worryingly soybeans.

Added to that list of woes is that fact that the US has revoked its membership of the developing Trans-Pacific Partnership and is also renegotiating its FTA with Korea – KORUS.

During a meeting of the International Trade/Agricultural Policy Committee at the NGFA’s annual convention this weekend, progress updates were broadly heard in silence as the panel contemplated the scale of the challenge.

On NAFTA, sources said negotiations had made good progress, but there remained significant issues ahead that would be difficult to compromise on.

Key to the disagreements are some of the US demands around a sunset clause – a five-year review timeframe that enables the US to cancel the agreement should it feel it’s not working – as well as some stipulations around the auto industry.

One further round of negotiations is anticipated, likely to be in Washington DC, but Mexico then heads into a presidential election in July and the US enters midterm elections in November, meaning any further meetings may have to wait until the end of the year.

For TPP, a source warned that the US exit from the agreement posed a threat to the country’s wheat exports to Japan.

“US wheat will be put at a considerable disadvantage, versus wheat from Canada or Australia... for those who operate in the Pacific Northwest, this is a very, very serious issue,” the source said.

Earlier this month, the remaining 11 countries of the TPP took the first stage towards ratifying it, with trade sources expressing hopes that the US could reverse its position and rejoin, although many were sceptical.

The US administration, for its part, appears undeterred with President Trump keen on delivering on his promise to dismantle what he claims are unfair multilateral agreements and replace them with bilateral deals.

And that’s where South Korea comes in.

Recent South Korean corn buying has topped nearly three-quarters of a million mt in recent weeks, with much of the volume poised to come from the US Pacific Northwest.

But even here participants are sceptical about the impact.

“You gotta ask how much of an advantage does this provide to non-US origin producers – it is going to hurt [US] producers,” one market source summarised.