Trade Debate: NAFTA agreement critical to Arkansas farmers

Other than the United States, the two favorite countries among Northeast Arkansas farmers and others who benefit from the region’s vital agriculture sector are Canada and Mexico.

Which is why Arkansas officials are hopeful there will be no significant changes to the North American Free Trade Agreement (NAFTA) as talks between the partner countries are ongoing.

NAFTA is a critical element in the state’s future agricultural success, and broadening trade with other nations such as China and Cuba should be a top priority for lawmakers in Little Rock and Washington, D.C., Arkansas Agriculture Secretary Wes Ward told Talk Business & Politics.

“Agriculture provides a $20 billion economic impact to Arkansas and it continues to be our state’s largest industry. It’s important to note that the economic impact of agriculture extends far beyond the individual farmer and rancher,” he said. “It includes the grocers, the truck drivers, the restaurant workers, the scientists and everything in between that helps get our food, fiber and shelter from the field to the table or the final end-user. Our export markets are very important to the agriculture industry because we typically export between 30-40% of our agricultural production each year, which is higher than the national average of about 20%. When our state’s agriculture industry suffers, our entire state suffers.”

Northeast Arkansas is the “bread basket” of the state’s agriculture sector. In 2017 the state grew 3.5 million acres of soybeans, 1.1 million acres of rice and 438,000 acres of cotton, according to the United States Department of Agriculture (USDA). The region’s flat rich soil has attracted farmers for generations. The First Congressional District, which encompasses all of NEA, is the top rice producing district in the United States.

Soybeans are the state’s most abundant crop, and the five leading soybean-producing counties are in Northeast Arkansas, according to the USDA. Mississippi County (292,453 acres) had the most followed by Phillips County (244,940 acres), Crittenden County (236,838 acres), Poinsett County (197,590 acres) and Arkansas County (179,388 acres).

Mexico buys about $1.4 billion worth of soybeans each year, according to the USDA. There are hundreds of soybean varieties and nearly all used to make livestock feed, American Soybean Association board member Brad Doyle said.

Soybean prices have been depressed in recent years because of a surge in soybean market growth in South America, especially in Brazil and Argentina. Farmers in those countries are slashing rain forest acres to create soybean farms, said Doyle, a soybean farmer from Weiner. American soybeans tend to be a little more expensive, but they are better quality; however, if prices change much at all, quality won’t matter, he said. Mexico may look to South America to buy more soybeans.

Clay County farmer and State Rep. Joe Jett (R-Success) told Talk Business & Politics threats to pull out of the agreement, signed in 1994 would be a “disaster” for the state. Jett explained the agri industry has been in the doldrums for the past several years, and any move to reduce international export market shares would impact small-time farmers. Less free trade would mean larger corporate farms and the further reduction of rural American ways of life, he said.

“I don’t think people in D.C. grasp where food comes from. … It comes from small towns like the ones we have in Arkansas,” Jett said. “I think this is a serious situation. It’s the foundation of our economy.”

SUPPORT FROM THE GOVERNOR
Gov. Asa Hutchinson submitted a letter in December to President Donald Trump’s administration touting the importance of NAFTA to the Natural State. Ward said the governor has been relentless in seeking international deals that will allow Arkansas farmers to sell more.

More than $1.8 billion in Arkansas agriculture exports went to Canada and Mexico in 2016, the letter states. The countries are the state’s top trading partners. Arkansas exports $1.4 billion in goods to Canada annually, and trade with Canada supports nearly 67,000 Arkansas jobs. About $400 million worth of goods is exported to Mexico, and trade between the state and that country is growing 3.6 times faster than with any other country, according to the governor.

Since NAFTA began, trade between the two countries has grown by 700%. Arkansas’ NAFTA exports include $167 million in poultry and eggs, about $127 million in meat products, and $82 million in grain exports, the letter states. Estimates show that more than 100,000 Arkansas jobs are supported by trade with NAFTA partners.

Arkansas exports more than $3.3 billion in agricultural products each year. Soybeans and soybean products ($1 billion), rice and processed foods ($768 million), broilers ($344 million) and forest and paper products ($312 million) are the primary agriculture-related exports, the letter states. It also said about 50,000 jobs in the timber, paper and processed foods sectors in the state are reliant on foreign investment from those two countries.

RICE IMPACT, TPP
A Lake City native, Ward said a withdrawal from NAFTA would have many agri sector impacts, but it would harm rice farmers. Rice-producing countries around the world have unfair subsidies and other trade practices that make it difficult for U.S. rice farmers to compete in global markets, the agriculture secretary contended. Mexico and Canada consume about 30% of U.S. rice exports, and if the agreement in terminated, it would be hard to replace those trade partners, he said.

“Pulling out of NAFTA would make it more difficult for our state’s rice producers to compete with other rice producing countries and it would increase the pressure to find new markets for our production which would be more difficult and costly to reach than our neighbors here in North America,” he said.

NAFTA isn’t the only free trade topic of concern for state officials. After Trump took office in 2017, he signed an executive order withdrawing the United States from the Trans Pacific Partnership, or TPP agreement. The deal would have given U.S. farmers greater access to Chinese soybean markets. Bluster about a potential trade war with China would be a disaster for Arkansas’s farmers, Jett said.

The Chinese buy soybeans to stifle inflation rates, Jett said. If a trade war erupts, he believes it would curb soybean imports. Fewer exports would mean a drop in soybean bushel prices. The price has hovered in the $9 to $10 per bushel range in recent years, and most farmers can make a living at that price point, he said. But, if it drops to $5 to $6 per bushel, it will force many small producers out of business. “A lot of farmers wouldn’t survive,” he said.

China has 1.4 billion people, and the country imports $22.3 billion worth of U.S. agriculture products each year, Ward said. The country recently rescinded a ban on U.S. beef, and has allowed for more access to their rice markets. The Chinese eat the equivalent of the entire Arkansas rice crop every 13 days, he said.

“Any additional market access to this country would have an impact on our agriculture industry. … Some estimated that TPP would have resulted in a significant increase in our agricultural exports,” Ward said. “Because agricultural trade is so important to the United States and to Arkansas producers we will continue to pursue market access and fair trade deals wherever possible.”

CUBA CONNECTION
Cuba is another potential market for Arkansas rice farmers. Each year about nine billion pounds of rice is grown in the state, and it supports about 25,000 jobs, according to the Arkansas Rice Federation. The five top rice-producing counties are in Northeast Arkansas. Poinsett County (91,324 acres) tops the list followed by Lawrence County (88,535 acres), and then Lonoke County (78,927 acres). Jackson County (77,826 acres) and Greene County (67,261) are fourth and fifth, respectively.

The island nation imports 80% of its food, a $2 billion market. The United States controls about 16% of that market, and its top imports are rice and poultry, Ward said. If Cuba imported rice at the level it did in the 1950s and early 1960s — up to 160,000 tons per year — it would be the seventh-largest rice market in the U.S. After Fidel Castro took power, the U.S. initiated a trade embargo and that market evaporated. Cuba started to import rice from countries such as Vietnam to feed its 11 million people.

In recent years, agriculture trade restrictions have been relaxed, but U.S. agriculture products cannot be bought with credit in the communist-controlled country. Ward said rice from Arkansas can be moved to Cuba in as little as 36 hours. It can take 36 days to move rice from Vietnam to Cuba. He contends Cuba is a market that is ripe for development, and it would be a boon to the Arkansas economy. Arkansas lawmakers have tried to have the credit exception removed, but have had no success.

Ward believes NAFTA and other trade agreements are critical to the success of farmers in Arkansas. There could be some changes to that agreement and others that would lift the Arkansas agri economy to new heights in 2018, and beyond, he said.

“Successful renegotiation and modernization would first do no harm to these important agriculture markets but instead would continue to increase access to agricultural goods, reduce unnecessary regulatory and non-tariff barriers, and ensure our farmers and ranchers receive fair treatment in trade disputes,” Ward concluded.