Arkansas farmers, ranchers and producers have been hedging their bets and bracing for the fallout from a potential U.S. trade war with China.
After the decision by President Donald Trump's administration to impose tariffs on imported steel and aluminum products, the U.S. singled out China with plans to impose duties on $34 billion in Chinese imports. Chinese trade officials have said they are prepared to impose an extra 25 percent tariff on 500 U.S. products, including beef, pork and soybeans.
Travis Justice, chief economist of the Arkansas Farm Bureau, said he fears the tariffs could lead to a domestic meat glut. When production surpasses demand because of higher prices -- an oversupply is common, Justice said.
"Because of the huge reliance on China, it's going to make feed costs lower, which will be supportive of raising more beef," Justice said. "I see a meat glut coming in response to this."
While slipping beef and pork prices are a concern to Arkansas, Justice said "the biggest impact is on the row-crop and soybean side. Roughly half of those imports or more go into China."
Soybeans account for more planted acreage in the state than rice, corn and wheat combined, according to the Arkansas Farm Bureau. Arkansas ranks 10th in the nation in soybean production, and China is the largest buyer of U.S. soybeans.
Arkansas-raised meats, by comparison, do not rely as heavily on China's market. Citing data from the International Trade Administration, the Arkansas World Trade Center said almost half of the state's exports go to Western Hemisphere nations. The bulk of Arkansas-raised meat -- $2.1 billion -- goes to Canada or Mexico, data show. Agriculture accounts for 43 percent of the state's exports to Mexico (27 percent) and Canada (16 percent), followed by Haiti (10 percent) and Hong Kong (6 percent).
China is the third-largest buyer of U.S. pork, but the Arkansas' hog production is not what it used to be. Cash receipts attributable to hogs fell from $100 million in 2007, to just under $57 million in 2016, according to the Arkansas Farm Bureau.
U.S. chicken products were also placed on China's tariff list, but U.S. chicken products have been banned from import in China because of a bird-flu scare three years ago. According to the National Chicken Council, the ban is still in effect.
Meanwhile, consolidated food companies, such as Tyson Foods -- with beef, pork and poultry operations across the nation -- fear the loss of their competitive edge because of the ongoing trade dispute.
"With the current volatility in trade relations, we've experienced day-to-day uncertainty in our ability to deliver products and services to customers," a Tyson spokesman said in an email. "With countries imposing retaliatory tariffs on U.S. products, Tyson Foods as well as others in U.S. food and agriculture, will lose our competitive advantage in critical export markets like Mexico, Canada and China."
A sliver of the total beef raised in Arkansas goes to China. U.S. beef accounts for 1 percent of China's imports after regaining access last summer, when a 14-year ban that stemmed from a mad-cow disease scare was lifted, according to the U.S. Meat Export Federation.
Justice did not have state-specific numbers for Arkansas beef exports, because most of the cattle raised in Arkansas is processed elsewhere.
According to the Arkansas Farm Bureau, Arkansas-raised cattle account for 14 percent of the total value of U.S. beef exports. These include exports to the state's largest trading partners: Mexico and Canada. The latter enacted additional tariffs on U.S. beef at the beginning of July.
Dan Wright, a member of the U.S. Meat Export Federation, said he's been involved in the beef industry for 45 years. Wright, 57, raises poultry and produces hay on his farm in Waldron.
"I don't see anything happening until some of this stuff can be hashed out," Wright said. "What's really going to affect our prices is the NAFTA deal."
According to the U.S. Chamber of Commerce, $339 million of exports from Arkansas are threatened by the trade war. A recent study, which compared each state's top three annual exports, shows that cotton ($12 million), aluminum scraps ($2.8 million) and bone-in, fresh or chilled bovine ($211,000), are the top Arkansas exports targeted for retaliatory tariffs by China.
Justice said he expects to see the fallout from a trade war later this year, when calving season starts and soybean farmers harvest their crops. He has seen prices for beef, pork and soy dip lower with each updated forecast.
"The ramifications come in the prices," Justice said.
Business on 07/06/2018
Print Headline: Meat glut in U.S. a fear in trade war