Cleaning the sanctuary after Sunday morning services, the janitor stumbled upon the transcript of the minister's sermon, replete with margin notes. Near the bottom of page 1, the preacher had written, "Weak point -- talk slowly while leaning over pulpit."
Two pages later, a paragraph was bracketed in red ink with side scribbling, "Weaker point -- talk louder and shake fist."
Finally, just before the conclusion of the homily, the nervous reverend had double underscored a sentence and arrowed, "Weakest point yet -- shout like hell."
While I'm not privy to the original manuscript used by USDA Chief Economist Robert Johansson last week when he addressed the USDA Agricultural Outlook Forum, there's little reason to bother with the choking paperwork required by the Freedom of Information Act.
As sure as all presidential putts at Mar-a-Lago under 10 feet are "gimmes," you can bet that Johansson's text was festooned with similar scrawls of caution and body language instructions, especially surrounding soft bullet points designed to predict 2018 meat exports.
Of course, his officially edited and published presentation seemed brimming with both optimism and confidence in that regard.
With nary a whisper of doubt or uncertainty, USDA's top number cruncher proclaimed that beef exports will top 3 billion pounds in 2018, up 5.7% from 2017. The Asian workhorses of Japan, South Korea and Hong Kong (beef-hungry countries that accounted for 57% of U.S. beef shipments in 2017) could be counted upon to carry demand in 2018 as well.
At the same time, pork exports will reach 5.9 billion pounds, almost 5% higher than 2017. Lower pork prices and firm global demand for meat proteins could be expected to drive U.S. pork exports. Japan and Mexico accounted for 50% of U.S. pork sales in the world market last year, and are expected to stand as aggressive buyers again in 2018.
While such unflinching bravado is completely understandable (What forecaster worth his salt doesn't growl in the face of ambiguity?), Mr. Johansson is a smart man, smart enough to be inwardly tempered by a long list of negative possibilities, potentially serious potholes along the road of export growth.
Topping the worry list could be the successful launching of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The 11-member (i.e., with the U.S. missing in action) version of the Trans-Pacific Partnership (TPP) looks set for formal signing in March (though respective governments need to sign off on the details before implementation). Gains are expected for beef/pork-exporting countries Australia, New Zealand, Mexico, and Canada thanks to reduced tariffs into key global beef importer Japan.
Second, bullish fantasies about aggressive, short-term growth in Chinese demand for U.S. beef probably need to be checked. China is allowing more beef imports and importing countries, intensifying competition in the market. Chilled beef access has been granted for Argentina, the fourth country behind Australia, the U.S., and New Zealand to be granted such access. In frozen beef, Belarus has obtained approval, and two facilities were officially accredited in January.
China has also signed a protocol for importing beef from France and the UK, and will likely begin shipments in the coming months. In addition, the first boatload of live cattle exports from northern Australia arrived in January. This boatload is the strongest indication that a live-cattle trade may become more permanent.
Finally, the great uncertainty surrounding the future of NAFTA was clearly the largest elephant in the room at the Outlook Conference.
The seventh round of negotiations has kicked off this week in Mexico City with still very little settled between the critical trading partners of the U.S., Mexico and Canada. While I think you can make the case that the anti-NAFTA rhetoric from the Trump administration has become less shrill in recent month, it remains far from clear that U.S. negotiators fully recognize the importance of a new, sustainable deal to American agriculture.
In 2017, Mexico and Canada combined accounted for 26% of total U.S. beef exports and 42% of all U.S. pork exports. Although these critically large market shares are well known to red meat producers, I'm troubled that they may be falling on the deaf ears of negotiators more motivated by political posturing than economic reality.
I'm sure Chief Economist Johansson was knowledgeable of all these wildcards and more when he pontificated about the export future last week. That's why the personal copy of his speech was no doubt annotated as aggressively as the preacher's sermon, filled with colorful reminders that persuasion often needs more help than just the facts can lend.
John Harrington can be reached at firstname.lastname@example.org
Follow him on Twitter @feelofthemarket
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