Most important challenge: Market access
As we enter the new year, farmers in Wisconsin are facing abundant supplies of corn, soybeans, wheat and dairy. With large crops come lower prices, which will clear the market, if we have access to new demand. For this reason, I believe the most important issue facing us in 2018 - and far beyond - will be expanding ag trade.
More than 95 percent of the world’s total population lives outside of our borders, and almost all population growth in the coming decades will happen overseas. South America, Southeast Asia and the Middle East are growing rapidly, both in terms of population and income used to buy more and better food.
Sizable market opportunities for grains, ethanol and co-products like distiller’s dried grains with solubles (DDGS) exist in countries we’ve been trading with for a long time, like Mexico and China. And, several countries that continue to depend on us for a reliable supply of grain, like Japan and South Korea, are also now looking at new biofuel policies.
All of these places can offer demand for our farm businesses given the right trading relationships, the ability to fight back effectively when trade is blocked for technical or political reasons, and solid infrastructure here at home that helps us get product to our customers
We need to focus on three pieces of the trade puzzle in the coming year:
Solid trade agreements are the first step to expanding grain sales. The United States has trade agreements in place with just 20 countries, but those markets were responsible for half of all corn exports last marketing year.
The Trump Administration is engaging in a renegotiation of the North American Free Trade Agreement (NAFTA), re-examining the U.S.-South Korea free trade agreement and exploring other markets that might be ripe for new trade pacts. This is important work for grain and ethanol sales, and it needs to move faster to help us sooner.
Once we have access to a market, we have to work there to help buyers know how to purchase and use our products and understand the advantages of U.S. origin. This work is done now by organizations like the U.S. Grains Council and the U.S. Meat Export Federation that have people on the ground around the world working directly with traders, end-users and government officials regulating trade.
The Wisconsin Corn Promotion Board and other corn boards across the country fund these efforts in partnership with dollars from two programs in the farm bill, the Market Access Program (MAP) and the Foreign Market Development (FMD) program. In this next farm bill cycle, making sure these programs are in place to support this work is critical to our long-term success.
When our customers overseas want to buy, we need to be able to get them product in a timely and affordable fashion. While our carryouts this year are very large, they are not historical, and we have already seen some stresses on the system resulting in extreme basis that hurt farmers’ bottom lines.
We also know that global demand for ethanol is increasing, which requires new and different export infrastructure. We need to expand our physical capacity to move grains and biofuels to keep up with anticipated demand growth and competitors that are investing in their systems. This means upgrading the transportation system from farm to the Gulf of Mexico and the Pacific Northwest.
U.S. agriculture has led on trade for decades. We know the benefit of robust exports because they help support our prices and keep us in business. I often hear at U.S. Grains Council meetings, “When trade works, the world wins!” As farmers, part of our responsibility in the new year is to ensure trade continues to work for us in this economy.
Zimmerman is a director of the Wisconsin Corn Promotion Board and a member of the U.S. Grains Council’s Innovation and Sustainability Advisory Team.