My father pointed out to me a long time ago that even a groundhog needs to get up on its hind legs once in awhile and peer over the alfalfa to see what's going on in the world.
As Congress will soon be coming back to "work," I'm sure they have gotten some looks around and they can't be too encouraged. While the world security situation will dominate their thinking – and everyone else's for awhile – most everyone else has to continue making a living. Here's a look at the rest of things.
While Vladimir Putin evidently has no qualms about sentencing his people to supposedly a year of shorter rations and higher prices, the impact on the American beef industry should be muted. While just a couple years ago Russia was a good market for certain end cuts, their cutting us off over feed additives early last year means we've already been through Russian market withdrawal.
The most likely impact on beef will be a possible price pressure from competitive meats. Russia was one of the top markets for poultry and an important one for hogs. The added supply here could pressure U.S. pork and poultry prices, if alternative export markets aren't found. One of the reasons our record beef prices have not dampened retail and foodservice demand as much as some expected is that pork and poultry prices have gone up also. Beef price increases were not an isolated incident. Not only have other meat prices gone up but many food prices have, also.
While the actual contents of the WTO report on the changes USDA made in the mCOOL Rule has been kept more secret than covert U.S. military operations, virtually everyone reading the tea leaves believes the WTO will rule against USDA and in favor of Canada and Mexico – again. Sometime soon the announcement will be made and the administration will have to decide whether to prolong the inevitable with further appeals.
Some 112 Congressmen sent a letter to USDA asking them to avoid delaying tactics if the WTO rules against the agency and "immediately rescind " the Rule and let Congress deal with the law.. The U.S. is losing packing plants and running under capacity at others for lack of slaughter cattle. We need more cattle to help fill out feedyards and packing plants and we need them now. Misguided, unneeded and damaging political games have already cost the entire beef and pork chains many hundreds of millions of dollars. To say nothing of damaging our nearest and biggest trading partners next door, both north and south.
If nothing regarding the pain and dollar damage the meat industry has suffered fazes this administration, perhaps they ought to consider the impact of higher food prices on consumers and the loss of jobs this ill advised Rule has caused. Do they enjoy seeing meat industry people and consumers suffer while they play political games they cannot ultimately win? The industry has enjoyed higher prices but moving too far too fast can change consumer buying habits that could hurt us long-term.
Canada has nearly 40 categories of items on its retaliatory list, targeting districts of members of Congress who have supported mCOOL, in addition to beef exports. Canada is our #2 beef customer (over $1 billion) and Mexico #3 (nearly $1 billion) (2013 USMEF & USDA data). Mexico has not published its list. Penalties could be 100 percent tariffs, costing the economy another billion dollars, hurt other industries and cut jobs in 2015.
Trade issues like this and Trade Promotion Authority (TPA) and the Trans Pacific Partnership (TPP) are all reasons this fall's elections are especially important to the meat industry. Majority Leader Harry Reid, along with the Senate Democrat majority, are major barriers to improved trade conditions for American producers in many industries. Reid will do nothing to further trade, for fear of upsetting contributions from labor unions and environmental groups.
If the Democrats lose the Senate and Reid has nothing to protect, TPA could happen and TPP negotiations could enter the important but difficult finishing stages. Other countries don't want to make important trade and internal subsidy concessions when the U.S. has not even bothered to give the president fast track negotiating authority and the assurance 535 Congressmen will not amend the agreement.
Then there is the issue of the expiring charter (Sept. 30.) of the Export-Import Bank. The bank is a quasi-government agency originally set up in the 1930s to aid American exporters, especially small business. The bank is funded by its lending activities but it is backed by the U.S. government, meaning taxpayers. It provides loans, loan guarantees, capital and credit insurance. Not only has the bank's management, its accounting methods and whether it is really making any money become questions but several high officials have run into legal problems regarding bank behavior. The Heritage Foundation reports that 98 percent of the $2.2 trillion in annual American exports do not involve the Ex-Im Bank.
Many conservative groups have come out opposing renewing the bank's charter, pointing out that while the bank was supposed to be helping small business, over 80 percent of the banks loans have gone to huge businesses like Boeing, Lockheed Martin and Bechtel. These businesses don't need special government help. And the small businesses that could use the help are ill-equipped to negotiate the labyrinthine processes the bank imposes. The conservative view is the bank is not doing what it was supposed to do, it is putting the taxpayers' money at risk in guaranteeing a ballooning portfolio and doing work private industry could do better, safer and more efficiently.
We asked several meat industry folks if the Export-Import Bank is important to exporting meat. The answer was essentially that financing from the Ex-Im Bank is a very minor issue from a beef industry standpoint.
The bottom line is, the Ex-Im bank is a government agency doing things governments shouldn't do and exposing taxpayers to unnecessary risk. At worst, if the bank's charter is renewed, some limits on the size of company and size of loan ought to be imposed and the processes streamlined so that the original intended beneficiaries – smaller companies – could benefit.