Capital Update – For the Week Ending June 16, 2023

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In this week’s National Pork Producers Council (NPPC) Friday recap: introduction of the EATS Act, NPPC comments on proposed ‘Product of USA’ labeling, West Coast ports tentative agreement, new trade deals legislation and April U.S. pork exports trend upward. Take a deeper dive below.

Republican Senators Introduced EATS Act to Protect Interstate Markets for Agricultural Commodities

What happened: On June 15, U.S. Senator Roger Marshall, M.D. (R-KS), alongside Republican Senators Chuck Grassley (IA), John Cornyn (TX), Tom Cotton (AR), Deb Fischer (NE), Kevin Cramer (ND), Joni Ernst (IA), Eric Schmitt (MO), Ted Budd (NC) and Bill Hagerty (TN) introduced the Ending Agricultural Trade Suppression (EATS) Act.

The legislation would preserve the exclusive right of states and local governments to regulate agricultural practices within their jurisdiction, free from interference from other states, ultimately preventing large states from regulating farmers and ranchers outside of their borders.

Why it’s important: California Proposition 12 prohibits the sale of pork from hogs whose mothers were raised on farms — anywhere in the world — that does not comply with the state’s arbitrary standards. It applies to any uncooked pork sold in the state, whether produced there or outside its borders.

NPPC’s take: California Proposition 12 will increase consumer food prices and drive small farmers out of business. NPPC believes that a state should not be able to regulate pork producers or farmers outside its borders. NPPC supports developing a long-term solution to Proposition 12 that ensures affordable, healthy products remain available to all Americans.

NPPC Files Comments on Proposed ‘Product of USA’ Labeling Rule

What happened: NPPC filed comments asking the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) to scrap or rewrite a proposed rule on labeling meat “Product of USA.” Under the proposal, FSIS only would allow that label claim for meat from animals born, raised, harvested and processed in the United States. Meat from live animals imported into the United States for feeding, harvesting and processing could no longer make such a claim. Minimally processed products could use a qualified U.S.-origin claim, such as “sliced and packaged in the United States using imported pork.”

Why it matters: While billed as ‘voluntary,’ the new rule would have the same effect as being mandatory since it creates a strong incentive for producers to prefer domestic animals to imported ones to use the “Product of USA” claim. That would have a detrimental impact on imports of live animals, potentially triggering U.S. trading partners, such as Canada and Mexico, to challenge the rule under the World Trade Organization’s (WTO) Technical Barriers to Trade Agreement or the U.S.-Mexico-Canada Agreement’s chapter on technical barriers. To be legal under WTO or the United States-Mexico-Canada Agreement (USMCA), technical trade regulations must treat imported products as favorably as “like” products of national origin.

If the rule were challenged by Canada and/or Mexico and found to be inconsistent with U.S. obligations under the technical barrier provisions, there would be a risk of retaliation against U.S. pork (among other agricultural and non-agricultural products) unless the United States resolved the inconsistency. The loss of the Mexican and Canadian pork markets, which in 2022 was $2.9 billion of U.S. pork, would result in the loss of thousands of U.S. agricultural and non-farm jobs and the loss of more than a third of the U.S. pork industry’s exports.

NPPC’s take: According to NPPC’s analysis, the proposed “Product of USA” rule would significantly increase livestock producers’ costs leading to higher food prices at a time when they are already struggling financially. The rule also does little to address consumer confusion about the origin of products and would strain the relationships between the U.S. and its trading partners with a high probability of tariff retaliation against U.S. goods, particularly agricultural products.

West Coast Ports Reach Tentative Agreement

What happened: On Wednesday night, the International Longshore and Warehouse Union (ILWI) and the Pacific Maritime Association (PMA) announced a tentative agreement on a new six-year deal after tensions escalated over the past week after the Port of Seattle closed. The union refused to send workers to the facility and engaged in work slowdowns at Long Beach, Los Angeles and Oakland ports.

The ILWU represents 22,000 dockworkers, and the PMA represents West Coast port facilities. Dockworkers at the West Coast’s 29 ports have been without a contract for almost a year as talks between the ILWU and the PMA have been ongoing. The parties came to an agreement after Acing Secretary of Labor Julie Su met with representatives from the ILWU and the PMA.

Why it matters: Port disruptions, including dockworker strikes and work slowdowns, can jeopardize the delivery of perishable commodities, costing agricultural producers millions of dollars and, potentially, foreign customers. It is imperative to avoid disruptions at West Coast ports, such as those in late 2014-early 2015, that cost the U.S. meat industry millions of dollars in lost export sales.

The Agriculture Transportation Coalition, which includes NPPC, recently warned that the port disruptions could ruin the reputation of U.S. agricultural exporters as reliable trading partners and could cost them valuable Asian export markets.

NPPC’s take: The U.S. pork industry depends on exports, which account for about a quarter of all sales annually and contribute significantly to every producer’s bottom line. About 60% of U.S. pork exports are transported by ocean freight, with the vast majority going from West Coast ports to Asia. The U.S. pork industry’s top three export markets are China, Japan and South Korea.

Legislation Calls for Congressional Consultations on Trade Deals

What happened: This week, the Senate and House trade committee leaders introduced legislation to approve the first trade deal negotiated under the U.S.-Taiwan Initiative on 21st Century Trade Initiative and required the Biden administration to consult with Congress on future agreements.

Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) and House Ways and Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) sponsored the companion measures, which also set robust transparency requirements.

The first agreement finalized under the U.S.-Taiwan trade initiative covers customs administration and trade facilitation, regulatory practices, services regulations, anti-corruption and small- and medium-sized enterprises. Among others, remaining issues to be hammered out include agriculture, labor and non-market practices.

Why it matters: The Wyden-Crapo and Smith-Neal bills will ensure that Congress can exercise its constitutional authority over international trade and that agreements can enter into force and become “durable, reliable legal frameworks” for the United States and its trading partners.

NPPC’s take: With nearly 24 million people and a cultural preference for pork, Taiwan should be a better market for U.S. pork. Last year, Taiwan imported just $13 million of U.S. pork. NPPC is urging Taiwan to eliminate restrictions on pork, including a country-of-origin labeling scheme and a ban on the internationally approved feed additive ractopamine.

U.S. Pork Exports Continue Upward Trend in April

What happened: Exports continue to be a bright spot for the U.S. pork industry, with April volume up 15% and value up 10% year-over-year. For the year through April, volume increased 14% and value 13%, according to data issued late last week from the U.S. Department of Agriculture.

April exports were nearly 244,000 metric tons (mt), valued at more than $660 million, and for the first four months of 2023, the totals were 960,480 mt, valued at $2.62 billion.

Destinations for U.S. pork: U.S. pork exports to Mexico continued their record pace, with April’s volume increasing 9% year-over-year and value up 7%. January through April numbers were 10% higher in volume (350,270 mt) compared with the same period last year and 27% higher in value ($691.3 million).

Other markets with significant increases for the month were Australia, China/Hong Kong, the Dominican Republic, Malaysia, the Philippines, South Korea and Taiwan. Exports to South Korea were their largest in nearly four years. The country was the No. 4 destination for U.S. pork for the first four months of 2023, topping Canada and behind only Mexico, China/Hong Kong, and Japan. Markets in Central America also continued to import more U.S. pork.

What it means for producers: April’s export value equated to $67.56 per hog, an increase of 13% from a year ago and the highest since May 2021. For the first four months of the year, the value equated to an average of almost $62 a head. Exports accounted for 32% of total April pork production and 29% for January through April, compared with just under 26% and 23%, respectively, from the same periods a year ago.

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