Trucking reciprocity with Mexico eases trade tension

The pilot program allowing trucks from Mexico into the U.S. began Friday. It’s part of an agreement on tariffs and trade reached last March between the Obama Administration and Mexico. It allows Mexican truckers and U.S. truckers to operate across each other’s borders for up to three years.

It’s also the official implementation of the trucking portion of the North American Free Trade Agreement, which has been in force since 1994.

The trucking issue is at the heart of a trade dispute between the two countries which was also been resolved Friday with the lifting of tariffs on 89 U.S. products. The tariffs were imposed in retaliation for the U.S. failing to allow Mexican trucking firms to operate north of the border in violation of NAFTA. Among the affected products are cheese, pork, potatoes, apples, grapes and other goods.

The resolution is a relief for U.S. cheese processors, according to U.S. Dairy Export Council president Tom Suber.

“These actions mean dairy products on Mexico’s retaliation list will now be free of the 20 to 25 percent tariffs that were restricting access to our best foreign market,” said Suber.

Another area of agricultural trade affected by the dropping of tariffs by Mexico is pork.

“Mexico is a very important market for the U.S. pork industry and for many other sectors. More than 6 million U.S. jobs depend on trade with Mexico,” said Doug Wolf, a pork producer from Lancaster, Wisconsin, and president of National Pork Producers Council.

According to the agreement, Mexican trucks can deliver cargo to any destination in the U.S. and pick up a load and return to Mexico, however they are not allowed to deliver between U.S. destinations. U.S. trucks are bound by the same guidelines in Mexico.

Opponents of the program, including the Teamsters Union, are concerned about the safety records of the Mexican carriers. The Federal Motor Carrier Safety Administration will monitor the ability of Mexican trucks to operate safely on U.S. roads.

So far, only one small Mexico-based motor carriers have been certified for the program totaling two vehicles.

Brownfield’s Bob Meyer and Ken Anderson contributed to this article.

Senate recesses without passing ag approps bill

The Senate has recessed for a week…without passing the ag appropriations bill. Leadership had hoped to wrap-up the spending package before leaving town but after dealing with a dozen amendments and a vote invoking cloture at 1:40 Friday morning, hung-it-up for the day. They will take the bill up when they return to Washington on November 1st.

Only two of the twelve amendments they voted on passed, one would deny farm program payments to anyone with a gross annual income of $1 million or more. The other increases funding for the emergency conservation program and emergency watershed protection program.

Earlier this week, Senator John McCain withdrew his amendment which would have prevented any ag-related funds from being used for ethanol infrastructure. A McCain spokesman said it was withdrawn due to “timing issues”.

Overall, a nice week for dairy markets

For the week, cash cheese barrels are unchanged, blocks are 3 cents higher, butter is 2.5 cents higher and the October, November, December average Class III price increased 29 cents.

Cheese stocks declined a bit in September. The monthly Cold Storage Report from USDA puts total cheese in storage at 1.04 billion pounds, down 2 percent from August and 2 percent lower than a year ago. American cheese stocks totaled 632.6 million pounds down 2 percent from August and 1 percent lower than a year ago.

Butter stocks dropped 9 percent from August to end September at 117.9 million pounds. That is 16 percent more than at the end of September in 2010 reflecting near-record butter production in September.

A few more dairy cows went to slaughter in September, USDA reports 247,000 head were slaughtered under federal inspection for the month, 2,000 more than in August and 4,000 more than September of last year. Year-to-date, 2.156 million dairy cows have been shipped, 86,000 more than January through September of 2010.

Dairy markets also encouraged by news Mexico is going to drop its tariffs on U.S. cheese. The tariffs were put on a number of U.S. products in retaliation for the U.S. not allowing Mexican trucks to operate north of the border. The WTO ruled that was a violation of the North American Free Trade Agreement. The two sides worked out a resolution with Mexico promising to drop the tariffs once a Mexican firm was granted a Federal Motor Carrier Safety Administration permit. A Monterrey-based company got one last week and the Mexican government responded as promised. The U.S. Dairy Export Council president Tom Suber said the resolution is a huge relief for cheese processors, “These actions mean dairy products on Mexico’s retaliation list will now be free of the 20 to 25 percent tariffs that were restricting access to our best foreign market.”

Grains and oilseeds drift late

Soybeans were lower on profit taking and technical selling. Soybeans started higher but with no fresh demand news, contracts just couldn’t follow through. The trade’s been talking a lot about fresh Chinese interest with nothing surfacing over the past several days. Still, losses were limited by scattered harvest delays and the firm cash basis. Soybean meal and oil were down following soybeans.

Corn was mixed, mostly firm, on fund buying against profit taking. There have been some harvest delays over the past week and farmer selling is slow, supporting the cash basis. Outside markets were very bullish ahead of an expected weekend European Union meeting. However, there was no fresh news and harvest in other areas is moving well. Ethanol futures were higher.

The wheat complex was mixed in consolidation trade. Contracts tried to make gains but couldn’t follow through due to the bearish fundamentals. Still, Chicago’s keeping an eye on feed demand, Kansas City is watching weather in the Southern Plains, and Minneapolis is looking at its own bullish fundamentals, at least relative to the other U.S. pits. European wheat was modestly higher, tracking the early U.S. gains. Kazakhstan’s Ag Ministry reports 99% of their grain crop is harvested with the total so far at 28.2 million tons.

Food Day: Eat real and reform factory farms

Monday, October 24th is Food Day, a nationwide campaign encouraging Americans to “eat real”. 

Organizers say there will be over two-thousand Food Day events held across the country.

Food Day is sponsored by the Center for Science in the Public Interest.   Jeff Cronin is a spokesperson for that group.

“We’re not a vegan organization, but we do want to nudge people in a more vegetarian direction, absolutely,” Cronin says. “But it’s not an anti-meat campaign.  We’ve tried hard to make sure that Food Day is a really inclusive event—designed to attract people and not repel them.”

One of the six Food Day principles is to “protect the environment and animals by reforming factory farms”.

“I think most people who eat beef, pork or poultry can look at the environmental issues associated with big, modern farms—or look at the treatment of hogs, cattle, egg-laying hens—and just think about the ways we can treat the earth and animals with greater care,” Cronin says.

AUDIO: Jeff Cronin (8:25 MP3)

The term “factory farm” is bothersome to a lot of people in the ag community, including Kay Johnson Smith of the Animal Agriculture Alliance.

“No one has really defined the term ‘factory farm’—it is really an activist term used to attack large farms” Johnson Smith says, “and large farms are very, very critical to our ability to feed the public in the U.S., but also to help meet the needs of a growing population worldwide.”

To counteract some of the negative Food Day messages, the Animal Agriculture Alliance has developed a special web site called “Real Farmers Real Food”.

“On this web site, we have provided tours of many, many types of farms, so the public can really see what modern-day farms look like,” Johnson Smith says, “and we’ve also addressed many of the myths that are raised by, not only Food Day, but many other activist campaigns that are targeting the food industry and targeting farmers and ranchers.”

AUDIO: Kay Johnson Smith (9:46 MP3)

The web site—realfarmersrealfood.com—also features a video with Miss America 2011 Teresa Scanlan of Gering, Nebraska.  Scanlan’s message—“Every day is Food Day to America’s farmers and ranchers”.

One of the co-chairs of the Food Day effort is Iowa Senator Tom Harkin, who has been criticized by some of his Iowa farmer constituents for his involvement in the campaign.

Beef stocks down on month while pork rises

USDA reports red meat in cold storage as of the end of September were up 5% on the month and 12% on the year at 944.544 million pounds.

Overall, the numbers reflect solid demand for beef and much slower than expected demand for pork.

Beef came out at 428.081 million pounds, down slightly on the month and up 8% on the year. The five year average for the September beef build-up is 9 million pounds and the trade was expecting a month to month increase in total supply.

Pork stocks were pegged at 490.713 million pounds, up 11% from last month and 16% above last year. That works out to a month to month increase of almost 48 million pounds, well above the five year average of 25.5 million and considerably larger than expected.

Frozen poultry came out at 1.194 billion pounds, down 3% on the month and nearly unchanged on the year. Chicken made up 673.583 million pounds, down 3% from last month and 5% from last year, with turkey at 515.375 million pounds, and duck at 5.085 million pounds.

Peel points to weight breakdowns

USDA’s estimate for September cattle placements showed a slight year to year increase bur according to one analyst, the number may not cause a major reaction.

Derrell Peel, livestock marketing specialist at Oklahoma State University, tells Brownfield the key for placements was in the weight breakdowns, “All of the increase was in the lightweight category of cattle, so I think we’re still moving some lightweight cattle in for lack of a home anywhere else.”

Peel adds, “Nebraska was the only state that showed an increase in heavyweight cattle and Nebraska has had very good forage conditions this year. Some of those yearling cattle are still grazing in Nebraska, starting to come into town as indicated here but probably a few more of those to go. Nebraska also had an increase in the lightweight category, so they placed a little bit of everything this past month.”

Allendale’s David Kohli says the numbers should be neutral to bearish for futures.

Boxed beef values were lower but pork was higher

Except for a few live cattle sales in Kansas at 121.00 the feedlot trade was wrapped up for the week after the active trade on Thursday. Slaughter cattle on a national basis for negotiated cash trades through Friday morning totaled about 162,690 head. Last week’s total head count was 127,792. Feedlot managers will be pricing cattle higher on Monday, probably around 123.00 plus on a live basis. Packers slowed chain speed this past week and the slaughter totaled 651,000 head, 1,000 more than the previous week, but 18,000 less than last year.

Boxed beef values were weak to lower on moderate demand and moderate to heavy offerings. Choice boxed beef was down 1.45 at 183.63, and select is .23 lower at 167.09.

USDA’s cattle on feed report released after the close of trade showed larger than expected placements, but overall the numbers were still fairly close to pre-report estimates. The report and analysis can be found in the news section of our web site.

Chicago Mercantile Exchange live cattle contracts settled unchanged to 90 points higher on Friday on support from the outside markets and this week’s higher cash cattle trade. There was some positioning ahead of the cattle on feed report released after the close of trade. October settled .47 higher at 121.92, and December was up .35 at 122.15.

Feeder cattle ended the session12 to 70 points higher on support from the live pit. Traders appeared to be counting on lighter cattle on feed replacements in the afternoon report.  October settled .12 higher at 139.40, and November was up .70 at 142.72.

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NCBA hopes Korean FTA will open doors

National Cattlemen’s Beef Association president Bill Donald—obviously pleased with the President’s signing of the FTAs—hopes the South Korean agreement will open doors with other countries in the Asian-Pacific Rim area.

“We’ve got some issues there with countries that have artificial trade barriers, such as Japan and China,” Donald says, “and I hope as they see this implemented and see the benefits to South Korea—and how it’s going to enhance trade between our countries—that they will follow suit.”

Donald says the trade agreements will increase beef demand and profitability.  He points to a CattleFax report putting the average per head value of exports to live cattle at over 200 dollars.

 

Closing Grain and Livestock Futures: October 21, 2011

Dec. corn closed at $6.49 and 1/4, down 1/4 cent
Nov. soybeans closed at $12.12 and 1/4, down 12 and 3/4 cents
Dec. soybean meal closed at $316.50, down $3.80
Dec. soybean oil closed at 51.25, down 14 points
Dec. wheat closed at $6.32, up 1 and 1/4 cents
Oct. live cattle closed at $121.92, up 47 cents
Dec. lean hogs closed at $89.65, down 32 cents
Nov. crude oil closed at $85.30, down 81 cents
Dec. cotton closed at 97.10, up 24 points
Nov. Class III milk closed at $17.65, up 23 cents
Dow Jones Industrial Average: 11,808.79, up 267.01 points