Despite the uncertainty caused by the ongoing trade war with China, here are two important economic developments that benefit soy growers and farmers.
U.S.-Mexico-Canada Agreement (USMCA) and WSMB and ASA Reaction
On October 1, 2018, the United States, Mexico and Canada announced the creation of a ‘New NAFTA’, the United States-Mexico-Canada Agreement (USMCA). The 25-year agreement should solidify economic relationships among the three nations of North America.
A recent press release by the American Soybean Association (ASA) notes that soy exports under NAFTA reached almost $3 billion in 2017 and exports to Mexico grew four fold. This makes Mexico the second-largest export market for U.S. soybeans and meal. The ASA also says that roughly $43 billion of American-grown agricultural products are exported to Mexico and Canada every year.
The USMCA will help stabilize the export market for growers. This follows the news of a new free trade agreement with Korea (KORUS) and progress toward a deal with Japan.
President of the Wisconsin Soybean Association (WSA), Tony Mellenthin, a soybean farmer from Menomonie, WI, believes the USMCA is “a step in the right direction” but “more action is needed” to help Wisconsin’s soybean farmers.
Says Mellenthin, “While this new trade agreement provides a great path forward for trade relations in North America, we hope the current administration continues to build on the momentum to improve trading relationships with the entire world, especially China.”
Mellenthin adds, “China currently consumes more than 30 percent of the soybeans grown in America in general, and Wisconsin specifically. There is no current trading partner that can replace China, and Wisconsin farmers are already feeling the harmful effects of the 25 percent tariff on prices for their soybeans.”
“Wisconsin soybean farmers are unafraid to compete for business anywhere in the world,” says Mellenthin. “We encourage the Trump administration to do all in its power to build free trade around the world, including, and especially, with China.”
ASA President and soybean grower from Keota, Iowa, John Heisdorffer, adds in a separate message, “With USMCA, KORUS and other agreements in sight, we are hopeful that a negotiated solution to the China tariffs could be in sight.”
Heisdorffer notes that with the uncertainty raised by the trade war with China, the creation of agreements like KORUS and USMCA are “timely and beneficial for our farmers and rural communities.”
To become effective, the USMCA must still be signed by the leaders of all three countries, then ratified by each of the three nations’ legislatures. This likely will not occur until 2019.
WISHH Aqua Feed Program in Cambodia Links Trade and Development
in a recent release, the ASA announced its “World Initiative for Soy in Human Health (WISHH) Program is building on its successful track record in aquaculture development by launching the Commercialization of Aquaculture for Sustainable Trade (CAST) – Cambodia.”
The goal of CAST is to connect trade and development by “by accelerating production of high-demand fish species for the Cambodian market and developing a lasting aquaculture industry that recognizes the value of soy protein in feed.”
Cambodia’s GDP is growing, with a GDP that increased more than 7% per since 2011. That growth has fueled the demand for animal and aquaculture-sourced protein. For aquaculture alone, demand for soybean protein is charted to reach 100,000 metric tons by 2030.
Soybean grower David Lueck of Alma, MO, was part of a WISHH program trip to see Cambodian aquaculture for himself. He came away impressed. “The Cambodian feed sector is growing rapidly, and they are increasing their consumption of U.S. soy,” said Lueck.
Added Matt Gast, a soybean farmer from North Dakota who joined WISHH staff for meetings in Cambodia, “Aquaculture is really taking off in Cambodia, and soy protein demand will grow with it. An importer of U.S. beans is building a brand new fish feed plant in Phnom Penh!’
CAST will also link American universities with local universities in Cambodia as well as collaborate with local private-feed sectors and the Cambodian Ministry of Agriculture, Forestry and Fisheries.
According to the release, over the last five years WISHH leveraged soybean farmer checkoff investments by a ratio of more than 6:1. CAST is a great example of the tremendous upside of growing trade and development around the world.