Progressive Cattleman sat down with Close to talk about trade and implications of the policies put forth by our new president.
How difficult are you expecting the coming years to be for U.S. beef trade?
Well, the first thing is: There is just so much uncertainty. The second point (that we do know) is: Given the increased beef production, but also the increased total protein production, we’re really going to be dependent on seeing our exports increase on an annualized basis.
We’ve never been able to exceed 10 percent of production. We were well above that month-over-month through the second half of 2016, so we’re off to a good start. But our dependency on export volume is going to grow.
If the U.S. renegotiates NAFTA (North America Free Trade Agreement), which country, Canada or Mexico, faces a bigger trade risk and why?
Mexico. There is a lot of risk associated with opening that whole thing up and what could come out of it. If the three countries were to go in unilaterally and say “OK, this agreement is a 30-year-old agreement; there’s been a lot of things that have changed; let’s look for revisions” – updating it could be pretty clean.
If they get in there, and if anybody throws anybody under the bus, then the whole thing’s up in the air and it could get really dicey. But just because of the whole claims from the administration on Mexico, trade balance and immigrants, there’s a lot of activity there that we just really don’t have with Canada. I would say Mexico is going to be in the tough spot.
I think I made reference that there’s going to be a lot of noise and a lot of hand-wringing, but if you look at the degree of integration in our agricultural production, of so many different markets of fruits and vegetables, feed, hay, livestock, meat; I think we’re going to worry a lot more about it than the actual damage.
I think at the end of the day, it’s so entwined we’ve got to find a way to get along here because we can’t find a way to break it up.
Will bilateral trade agreements work well with those partners we had in the TPP agreement?
Well, each one will be different. Some of the stuff I have read and some of the interviews I have seen I think make a really good point: One of the real drivers behind pushing for the TPP was the legislators came to the conclusion there’s a lot of political capital spent to complete any trade agreement, and the amount of political capital spent to get a multi-country deal is really not a lot greater than the political capital spent to get a single bilateral deal.
And if there’s political capital spent for each bilateral agreement, how much political capital is there to spend before voter constituents start running out of patience? That’s where I see a big risk with trying to go with multiple, multiple bilateral.
What labor changes are we looking at in the beef industry under President Trump?
That’s really tough. If this limitation on immigrants really gets serious, and the fact that it’s a major share of the labor in the fruit and vegetable market – it’s the major share of labor in the feedyard and the swine industry; it’s the major share of labor in the processing and packing – it could be a big concern.
The other add-on there is: Clearly, like everything, it’s a supply and demand market. So if that demand gets high enough, it will ultimately mean they will start seeing higher wages because of demand.
What do you tell the commercial cow-calf producer who says U.S. export prices don’t show up in the price he sees when selling calves?
I can see his frustration from a view of the “trickle down” perspective – but the overall claim that it isn’t reflected in his calf prices, I would pretty strongly disagree. Because while he may not get the full benefit down to the cow-calf level, it is clearly reflected in the packer margins that, in turn, affects the feedyard margins then, in turn, affects the feeder cattle margins and down to cow-calf.
He may not think he’s seeing the price benefit when we see exports improve, but he will definitely see the negative impact on his prices if we don’t get more exports out there. I am just not convinced that he doesn’t see any benefits.
He might not see it to the degree he wants to see it, but I think, visible or not, he is getting benefits today and if we don’t get that product out of here, he is going to have a huge disadvantage that he does see. 
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Cassidy Woolsey
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