CLA: Congress Must Act Quickly to Pass the U.S.-Mexico-Canada Agreement
Greeley, Colo. – There is a lot of talk in Washington, D.C. these days about the dismal state of the rural economy. Low commodity prices, extreme weather, and uncertainty in key foreign markets continue to plague agricultural producers across the country, including producers here in Colorado.
Fortunately, Congress has the power to help. Ratifying the U.S.-Mexico-Canada Agreement (USMCA) would provide a much-needed boost to cattle producers and it would benefit our rural communities that depend on exports to Canada and Mexico for economic success.
The USMCA was signed in November 2018, but all three countries must ratify the agreement in their legislative bodies before it can take effect. Lawmakers to our north and south have started to move in that direction. Mexico passed a series of much-needed labor law reforms that were a condition of USMCA, and they have indicated their intent to ratify USMCA. Canada has also taken steps to introduce the USMCA in Parliament. Yet here at home, we are still waiting on Congress to signal that it is ready to take action.
For cattle and beef producers, the benefits of moving forward with the agreement are clear. USMCA maintains duty-free, unrestricted access to Canada and Mexico – worth nearly $2 billion in sales annually. But these top-line figures do not tell the whole story.
Trade with Canada and Mexico allows U.S. cattle and beef producers to maximize the value of each animal by selling specific products to the highest bidder. For example, Mexican consumers are willing to pay more for beef cuts that are less popular the U.S. By exporting to Mexico, U.S. producers fetch a higher price for products like tripe, tongue, and heart than they would get on the domestic market. No wonder we sold $240 million worth of these products to Mexico last year.
Open markets and science-based trade make all this possible. In fact, U.S. beef exports have flourished with zero tariff and non-tariff barriers on cattle and beef under the North American Free Trade Agreement (NAFTA). Exports to Canada have increased 106%, while exports to Mexico have increased 545%.
The USMCA keeps the highly-successful framework for cattle and beef trade in place while rejecting failed trade policies, like mandatory country-of-origin labeling, that brought nothing but economic harm to U.S. cattlemen. That is why it is critical that Congress moves quickly to pass the agreement.
If the delays continue, the chance to pass the USMCA this year will be lost. The Canadian Parliament is set to adjourn by the end of the month, and a federal election is scheduled for the fall. In the U.S., the 2020 election season is already heating up – and will make major legislative action unlikely in the months ahead.
Without USMCA in place, cattlemen and other agricultural producers will continue to face massive uncertainty in two of our largest export markets. Producers in Colorado will feel the consequences. Last year, our state directly exported over $338 million worth of beef to Canada and Mexico. And that does not count all the economic gains cattle producers in Colorado receive by selling their animals to other cattle feeders and processors who sell across North American borders.
Cattlemen need the USMCA to be approved fast. President Trump has threatened to withdraw from NAFTA completely if USMCA does not move forward. The consequences of such a move would be severe. High tariffs and unscientific trade restrictions would return to North America, causing further damage to the rural economy for years to come.
This doomsday scenario can be avoided, but only if Colorado’s elected officials stand up for the USMCA. Our U.S. Representatives and Senators should be doing everything they can to get the USMCA across the finish line.
Detailed Overview of Beef Trade with Canada and Mexico (from U.S. Meat Export Federation):
Mexico and Canada are consistently among the top five export markets for U.S. beef. In 2017, exports to our NAFTA partners were valued at $1.77 billion, more than a three‐fold increase from 1995, and accounted for 24 percent of total U.S. beef export value. On a volume basis, exports of 354,500 mt accounted for 28 percent of total U.S. beef export volume, with Mexico as the second largest export destination, and Canada as number five.
In Jan‐Sept 2018, exports to our NAFTA partners were valued at $1.36 billion, up 2% year/year (volume of 264,130 mt was up 1%) and accounted for 22% of export value and 26% of export volume. Exports to Mexico were up 8% in value to $783 mil with volume up 1% to 177,900 mt. Mexico is the top market for U.S. beef variety meat exports on a volume basis (follows Japan in value) and exports totaled 72,000 mt valued at $166 million, down 2%, even though volume was down 8% from last year‐ so Mexico is paying higher prices/ buying a higher value mix of variety meats. U.S. beef muscle cut exports to Mexico were up 11% to $616.8 million (106,000 mt, up 9%). Mexican consumers have a preference for high‐quality U.S. beef, and USMEF continues to educate on and promote value cuts as price remains a critical factor
for many Mexican households. In this sense, maintaining duty‐free access to the Mexican market is absolutely essential.
The U.S. is the dominant supplier of beef to each Mexico and Canada, benefiting from the preferential access under NAFTA. The U.S. is also the top market for exports of beef and cattle from Canada and Mexico.
The trade is complementary, and demand driven, with U.S. exports of end cuts, like rounds and shoulder clods, and variety meats to Mexico; while the U.S. imports middle cuts, mainly for use at casual foodservice. It is important to remember that the vast majority of Mexican consumers just want affordable protein. U.S. end cuts are not only generally affordable, but they also fit Mexico’s preference for products such as milanesa, based on a relatively lean, thin cut (like from the round).
Mexico has also been increasing their production of fed cattle using U.S. grain and had been shipping record volumes of beef to the U.S., although volume has slowed somewhat this year. The product is relatively high valued, including middle meats for use at U.S. foodservice, and Mexican producers get a higher price by selling these items in the U.S. market. Similarly, U.S. exports of rounds, shoulder clods and variety meats (like tripe) to Mexico add value to the carcass by increasing the prices for these items which are typically less demanded in the U.S. market.
U.S. imports of beef from Mexico in Jan‐Sept of this year were down 12% to 152,267 mt, but value was up 10% to $866 million and on a value basis, Mexico was the #3 supplier of beef to the U.S., after Canada and Australia (and #4 in volume, following New Zealand). For 2017 U.S. imports of Mexican beef reached $1.06 billion / 226,300 mt.
The U.S. is still a net exporter of beef to Mexico due to the large volume of variety meats. For example, tripe exports to Mexico in Jan‐Sept averaged $3.15 for every head of fed slaughter. Total beef/bvm exports to Mexico averaged $40.55 per head of fed slaughter in Jan‐Sept, up $2.30 from the same period last year.
Trade with Canada includes a wide range of cuts and is often driven by regional demand, where it can be more efficient to source product out of the U.S. rather than shipping it across Canada, and vice versa. The total value of beef trade between the three countries has grown from less than $1 billion in 1995 to average more than $4 billion over the past 4 years (2014‐2017).
The U.S. also imports cattle from both countries, with import value peaking in 2014 at $2.5 billion, although import volume peaked in 1995, at 2.8 million head. U.S. imports of Mexican and Canadian cattle are critical components of the U.S. cattle feeding industry, especially in the Southwest and Northwest. Mexican and Canadian cattle accounted for an average of 6 percent of U.S. slaughter from 1994 to 2017, and 6 percent of U.S. slaughter in 2016, when imports totaled 1.7 million head, the lowest since 2004. U.S. imports rose to 1.83 mil head in 2017 on growth from Mexico with 1.16 mil head, up 23%. Cattle imports vary depending on a number of market factors, including exchange rates, cattle prices in each country, comparative advantages in feed and slaughter costs, and pasture conditions. For example, as the U.S. herd rebounded in 2016, imports of cattle from Canada and Mexico slowed. U.S. imports of feeder cattle from Mexico in Jan‐Sept of this year totaled 851,200 head, up 9% from last year. U.S. imports of Canadian cattle were 492,200 head, down 4% from last year. Mexican cattle accounted for about 3.5% of U.S. slaughter through September 2018; and Canadian cattle accounted for about 2%.
A new dynamic has also developed over the past couple of years, where the U.S. is exporting more cattle to Canada. Canada’s cattle herd has not expanded like we have seen in the U.S., and Canadian cattle feeders and packing plants are increasingly sourcing U.S. cattle to fill their lots and their plants. The U.S. has exported 116,346 head of cattle to Canada in Jan‐Sept, up 81% from last year and reflecting tight supplies in Canada as feeders compete to fill yards. U.S. cattle have accounted for about 7% of Canada’s slaughter while Canadian cattle have accounted for just 2% of U.S. slaughter, in Jan‐Sept 2018. U.S. cattle exports to Mexico are still fairly limited at 16,852 head this year, down 26% with a decrease in breeding and other cattle (including feeders).
Overall, the integration in the beef and cattle industries across Mexico, Canada, and the United States has helped make the North American industry more competitive in the global market and has helped increase beef availability and thus benefited consumers within North America. The United States, Mexico, and Canada are unique as each country is both a major importer and a major exporter of beef, largely due to the trade flows within North America. For perspective, in 2017, U.S. beef accounted for 15 percent of Canadian beef consumption and 9 percent of Mexican consumption while U.S. consumers still primarily consume beef produced in the U.S., with imports from Canada and Mexico accounting for 3 percent and 2 percent, respectively, of U.S. consumption.
Colorado Livestock Association (CLA) was formed in 1998 through a restructuring of the then 43-year-old Colorado Cattle Feeders Association (CCFA). CLA members are cattle and sheep feeders, cow/calf producers, dairy farmers, swine operations, and industry partners. CLA works on behalf of its members in the regulatory and legislative arenas in Colorado. For more information about CLA visit www.coloradolivestock.org