Harrington's Sort & Cull

Beef Bosses Write Trump

John Harrington
By  John Harrington , DTN Livestock Analyst
Connect with John:

Whenever the same old problem, begging the same old answer, keeps presenting itself in a variety of transparent disguises, the simplest and most effective tool is often none other than the standard form letter.

For example, if the proper reply to multiple cases of misbegotten repair is "if it ain't broke don't fix it," such tried-and-true automation can save you hours of time and grief.

On the other hand, if a tell-tale combination of mailing label, screwy salutation (e.g., "Dear Concerned Occupant") and skipping autopen in red ink causes your response to be slammed into the circular file unread, it may be time to get more focused and personal.

Now I don't know for sure if last week's attempted communication between the CEOs of the National Cattlemen's Beef Association, the North American Meat Institute, and the U.S. Meat Export Federation on one hand, and USDA Secretary Sonny Perdue and Ambassador Robert Lighthizer of USTR on the other, actually employed a form letter. The urgent missive about the ongoing welfare of the beef trade with South Korea just struck me as a little worn around the edges.

What do you think?

Basically, these captains of the beef business wrote to highlight the success the U.S. beef industry has experienced with its exports to South Korea since the Korea-U.S. Free Trade Agreement (KORUS) came into force (i.e., March 2012). The correspondence was no doubt prompted by the announcement from the Trump administration that there will be a special session with South Korea to discuss potential changes to the KORUS. But it's when these nervous executives quickly cut to the chase that I sense a strange wave of deja vu:

"Simply put, KORUS created the ideal environment for the U.S. beef industry to thrive in South Korea. We would not support any changes in the terms of the KORUS that would jeopardize either our market share or the significant investment that has been made in rebuilding Korean consumer confidence in the safety, quality, and consistency of U.S. beef."

Is it just me, or has this no-nonsense paragraph become standard boilerplate in 2017, one with flexible placeholders embedded in the text, eagerly ready to merge with a data base list containing the likes of TPP, NAFTA, and Japan?

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

Such streamlining would seem both understandable and strategically wise given this year's awkward combination of surging beef exports on one hand, and sustained protectionist rhetoric from the White House on the other.

More specifically, beef exports through the first half of 2017 totaled 1.33 billion pounds (carcass weight), 15% greater than Jan-Jun 2016 and representing 10.5% of total commercial production for the period (up from 9.5% for the same six-months last year).

With YTD beef production running as much as 5% above 2016, red-hot export demand has significantly reduced the potential burden of per-capita supplies and thereby stimulated ranch and feedlot revenue from coast to coast.

At the same time, the new Trump administration has repeatedly challenged the traditional Republican allegiance to free trade. Most political analysts have concluded that the key to President Trump's surprising victory last November was his ability to attract many blue-collar Democrats with corrective talk of lost jobs, effectively blaming immigrants in one breath and unfair trade agreements in the next.

While it should surprise no one that the Trump Team continues to dance with those who "brung 'em," meat producers find themselves both disappointed and frustrated by the necessity to aggressively lobby for a cause (i.e., the expansion of global trade) once considered to be a no-brainer among certain friends.

Whatever. You do what you have to do.

Actually, nothing underscores the importance of keeping your plow in the ground like the recent history of South Korean demand for U.S. beef. In 2016, South Korea represented our second largest customer (i.e., purchased as much as 27% of total U.S. exports), surging ahead of Mexico, Canada, and Hong Kong, and falling behind only Japan.

In the first half of 2017, South Korea has purchased approximately 211.8 million pounds (carcass weight), 16% more than the same period last year, and 22% of the entire Jan-Jun beef shipment to all countries.

As impressive as these stats may seem, one needs to remember the ugly backstory of erstwhile Korean protests against U.S. beef in order to fully appreciate the urgency and seriousness of the letter referred to above.

When the case of BSE was discovered in Washington state in late 2003, South Korea joined the large league of nations that banned the importation of U.S. beef. In 2008, the South Korean leaders agreed, after extensive negotiations, to once again accept U.S. product, a decision set off a firestorm of controversy within the country, leading hundreds of thousands of citizens, terrified by the perceived danger of U.S. beef, to come out that spring and early summer in often violent protest over the resumed imports.

Several years later, the two countries inked the aforementioned Korea-U.S. Free Trade Agreement. I dare say even the most cockeyed free-traders at the signing table that day, spooked by the memory of angry consumer armies paralyzing the streets of Seoul, could imagine such enormous success in less than a decade.

So it's no wonder that Trump's glib threat to renegotiate or terminate KORUS (e.g., alternately calling it "a job killer," "a horrible deal," and something that has left America "destroyed") quickly drew the attention of beef industry leaders. Indeed, the more I think of it, this was no form letter. Despite the common ground shared with other trading deals critical to the livelihood and growth of the U.S. beef industry, the viability of KORUS was seen as too important to be canned in any way.

The amazing success of KORUS is a story of hard work and long-term commitment (e.g., dropping 2.7% each year, Korean tariffs on U.S. beef are scheduled to be completely eliminated by 2025), sternly reminding those who would, willy-nilly, take their ball and go home that meaningful game time could turn out to be painfully limited.

For more from John see www.feelofthemarket.com

Follow John on Twitter @Feelofthemarket

(CZ)

P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]

Comments

To comment, please Log In or Join our Community .